Maybe its late or something but does this question make sense to anyone? A US company needs to raise 100M euros - it will issue dollar denominated bonds and use a currency swap to convert to euros. It expects interest rates to fall in both US and Europe. (A) Should the swap be structured with interest pd at a Fixed or floating rate? (b) Should the swap be structured with interest pd at a Floating or fixed rate? (A) + (B) are basically the same question (just reversed Pay fixed or Floating) and the information above doesn’t seem to really give you enough information. I read the answer and I’m not sure how it ties into the question. Given that the co anticipates both interest rates to fall - I would assume that it would want a floating rate, but the question doenst say if the bonds would be issued as fixed or floating? ??? D_M

I do not have book in front of me, But is it not trying to say that swap should be structured to have pay floating (you pay floating, here because it is dual currency you pay floating euro interest, caz interest goes down) and you want to be paid from counter party in dollars with fixed payment ? I thought it was simple question but … I have to look at the text .

^I remember that question and I remember it being worded correctly.hhhmmmmm… IF you expect the Rates to be decreasing in Both you want to PAY Floating (b/c interest rates will be decreasing in Europe) and RECEIVE Fixed (b/c IRs are decreasing in US) so if IR’s do decrease you will receive an extra yield pickup b/c you’ll be receiving more in interest than you are paying out.

I read it again this AM and I guess since it doesnt say (A) In the US \$ (B) in Euros - Im not sure what A and B are referring to.

Data_Monkey Wrote: ------------------------------------------------------- > I read it again this AM and I guess since it > doesnt say (A) In the US \$ (B) in Euros - Im not > sure what A and B are referring to. what does it matter if its US or EUR, either way you want to pay float

B/c if one was going to increase you wouldnt want to pay floating on the one increasing

HOLY CRAPOLA! I think it just hit me (after about 6 pepsi max’s) - I get the question now. I was reading too much into it - The A and B were not worded very well, however.