Assume Morgan Guaranty, Ltd. is quoting swap rates as follows: 7.75 - 8.10 percent annually against six-month dollar LIBOR for dollars and 11.25 - 11.65 percent annually against six-month dollar LIBOR for British pound sterling. At what rates will Morgan Guaranty enter in a $/£ currency swap?
Morgan Guaranty will pay yearly fixed-rate dollar payments of 7.75 percent against attaining six-month dollar LIBOR flat, or this will attain fixed-rate annual dollar payments at 8.10 percent against paying six-month dollar LIBOR flat. Morgan Guaranty will make annual fixed-rate £ payments at 11.25 percent against gaining six-month dollar LIBOR flat, or it will attain annual fixed-rate £ payments at 11.65 percent against paying six-month dollar LIBOR flat. Therefore, Morgan Guaranty will enter into currency swap wherein it would pay annual fixed-rate dollar payments of 7.75 percent in return for attaining semi-annual fixed-rate £ payments at 11.65 percent, or this will receive annual fixed-rate dollar payments at 8.10 percent against paying annual fixed-rate £ payments at 11.25 percent.