Firm A is a German firm in need of dollars, and Firm B is a U.S. firm in need of Euro funds. The following table presents borrowing rates for both firms: ----------U.S. Dollar Rate—Euro Area Rate Firm A--------9%----------------7% Firm B--------8%----------------8% Assume that Firm A and Firm B enter into a plain-vanilla currency swap. Which of the following best describes the initial cash flows between the firms? -----------------------------Firm A ---------------------------------Firm B A) pays a fixed rate on dollars received ---------pays a fixed rate on Euros received B) pays a floating rate on dollars received------- pays a floating rate on Euros received C) pays a floating rate on dollars received-------- pays a fixed rate on Euros received D) pays a fixed rate on dollars received------------ pays a floating rate on Euros received
A? since it is plain vanilla and the rates are given i.e. no mention of LIBOR etc?
A
A it is.