Company A, a British manufacturer, wishes to borrow U.S. dollars at a fixed rate of interest. Company B, a U.S.' multinational, wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects): POL78 Sterling U.S. dollars Company A: 11.0% 7.0%

Company B: 10.6% 6.2%

C ' TE R MechcaLcs of Options Markets Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies.