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Consider a U.S. commercial bank that wishes to make a two-year, fixed-rate loan in Australia denominated in Australian dollars. The U.S. bank will fund the loan by issuing two-year CDs in the U.S. Why would the U.S. bank wish to enter into a currency swap? The bank faces the risk that: A. the Australian dollar increases in value against the U.S. dollar. B. interest rates in Australia decline. C. the Australian dollar decreases in value against the U.S. dollar. |