Bank USA has fixed-rate assets of $125 million funded by fixed-rate liabilities of 187.5 million Euros paying an interest rate of 10 percent annually. Bank Dresdner has fixed-rate assets of €187.5 million funded by fixed-rate liabilities of $125 million paying an interest rate of 10 percent annually. The current exchange rate is €1.50/$. They agree to swap interest payments on their liabilities to hedge against currency risk exposure for two years. What amount will Bank Dresdner pay for Bank USA's liabilities each year? a. $18.75 million b.€18.75 million c. €12.5 million d. $12.5 million
