Company A, a British manufacturer, wishes to borrow US dollars at a fixed rate of interest. Company B, a US multinational, wishes to borrow British pounds at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects).

British Pound US Dollars

Co A 11.0% 7.0%

Co B 10.6% 6.2%

Design a SWAP that will net a bank acting as an intermediary 8 basis points per annum and that will produce an equal gain per annum for each of the two companies. The two companies will not take any currency risk. Please explain your answers.