Goodrich-rabobank interest rate swap

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Reference no: EM132510045

Pinduoduo (PDD) is trying to issue a 5-year note. Because it is a Chinese firm listed in the US, it wants to test the eurobond market by considering raising money in USD. The current exchange rate between Chinese RMB to USD is 0.14, i.e. every Chinese RMB can be exchanged to 0.14 USD. The term structure in China and US can be found in the following table for the next 5 years:

CHN USA

1 year 1.167% 0.17%

2 year 1.362% 0.20%

3 year 1.514% 0.24%

4 year 1.735% 0.29%

5 year 1.896% 0.34%

After some negotiation, Pinduoduo can borrow in RMB at a rate of 3.7% (annual coupon) for 5 years, and 2.2% (annual coupon) in USD. Assuming interest rate parity, should PDD issue in USD or RMB?

The B.F. Goodrich-Rabobank Interest Rate Swap

Reference no: EM132510045

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