Find the range of interest rates swap


Apple Inc. wants to borrow pounds, & Virgin Airlines wants to borrow dollars. Because Apple is better known in the United State, it can borrow on its own dollars at 7 percent and pounds at 9 percent, whereas Virgin can borrow dollars at 8 percent & pounds at 8.5%.

[A] Assume, in fact, that Apple can borrow dollars at 7 percent and pounds at 9 percent, whereas Virgin can borrow dollars at 8.75% & pounds at 9.5 percent. Find what range of interest rates would make this swap attractive to both parties?

[B] Based on the scenario in 1.c, assume Apple borrows dollars at 7% & Virgin borrows pounds at 9.5%. If the parties swap their current proceeds, with Apple paying 8.75 percent to Virgin for pounds and Virgin paying 7.75% to Apple for dollars, determine the cost savings to each party?

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Finance Basics: Find the range of interest rates swap
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