The following statement is to be used in answering questions
Axil Corp. has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating rate dollar borrower, which it can be at LIBOR + 1%. Bevel Corp. strongly prefers fixed rate DM debt, but it must pay 1.5% more than the 6 1/4% coupon that Axil's DM notes would carry. Bevel, however, can obtain Eurodollars at LIBOR + ½%.
-is the maximum possible cost savings to Bevel from engaging in a currency swap with Axil?
A) 1%
B) 75%
C) 2%
D) 1.25%

Question

The following statement is to be used in answering questions 
Axil Corp. has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating rate dollar borrower, which it can be at LIBOR + 1%. Bevel Corp. strongly prefers fixed rate DM debt, but it must pay 1.5% more than the 6 1/4% coupon that Axil's DM notes would carry. Bevel, however, can obtain Eurodollars at LIBOR + ½%.
-is the maximum possible cost savings to Bevel from engaging in a currency swap with Axil?
A) 1%
B) 75%
C) 2%
D) 1.25%

Quizplus · Accepted Answer

The Answer of The following statement is to be used in answering questions 
Axil Corp. has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating rate dollar borrower, which it can be at LIBOR + 1%. Bevel Corp. strongly prefers fixed rate DM debt, but it must pay 1.5% more than the 6 1/4% coupon that Axil's DM notes would carry. Bevel, however, can obtain Eurodollars at LIBOR + ½%.
-is the maximum possible cost savings to Bevel from engaging in a currency swap with Axil?
A) 1%
B) 75%
C) 2%
D) 1.25%

The Following Statement Is to Be Used in Answering Questions