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Alles Ales (AA) and Barnicle Boats (BB) each need $5 million in funds and go to the market for quotes. They are quoted: for AA

Alles Ales (AA) and Barnicle Boats (BB) each need $5 million in funds and go to the market for quotes. They are quoted: for AA fixed: 7.4 per cent; floating: BBSW plus 2 per cent; for B fixed: 8.8 per cent; floating: BBSW plus 2.2 per cent. If AA accepts the fixed-rate funds and BB the floating-rate funds, then they both decide they can reduce their cost of funds through a swap, structure a swap where they both benefit equally.

AA

BB

Pays to market

- 7.4%

-(BBSW + 2.2%)

Pays to other

- BBSW

- 6.0%

Receives from other

+ 6.0%

+ BBSW

Net result

BBSW + 1.4%

8.2%

Please explain to me how come the answer is (-6.0%) on pay to other of company BB

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