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By June 2015, Greece has government debt over 180 percent of its GDP. Part of...

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Accounting

By June 2015, Greece has government debt over 180 percent of its GDP. Part of the borrowing by Greek government was through currency swaps.

Explain why the following swap resulted in a net borrowing by Greece. Greece enters a 10-year currency swap with Goldman Sachs, receiving fixed rate, 4%, on euro annually and paying fixed rate, 1% on yen annually. The principal amount is 248b or 1b. At the time of swap, the market exchange rate is 124/.

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