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What market does us corp have a comparative advantage

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US Corp can issue debt denominated in US dollars at 6% interest or can issues debt denominated in Euros at 5.5%. German Corp can issue debt denominated in US dollars at 8% or issue debt denominated in Euros at 6.5%. US Corp would prefer to issues debt denominated in Euros and German Corp would prefer to issue debt denominated in US dollars.

a) Given this information would these two companies be a good candidate for a currency swap (Yes or No)?

b) Briefly explain how you know this is possible?

c) What market does US Corp have a comparative advantage in (US dollar market or Euro market)?

Reference no: EM132516479

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