Assume Airtec Inc., a US based company, can borrow $1.8 million at 9% fixed. Alternatively, it can

borrow in pounds in the UK at 12%. Shipley Inc., a British company, can borrow the same amount

in pounds for 11% in the UK. The can also borrow in dollars in the US at 12%. Show how an

intermediary can arrange a swap where the US Company pays in pounds and the British company

pays in dollars with equal savings. Assume the intermediary receives no fee. The current spot rate is

$1.80/. There is no up-front fee.