Company (A) would like to borrow pounds, and Company (B) wants to borrow dollars. Because Company (A) is better known in the United States, it can borrow on dollars at 6% and pounds at 7.5%, whereas Company (B) can on its own borrow dollars at 6.4% and pounds at 7.1%. Suppose Company (A) wants to borrow 2 million for two years, Company (B) wants to borrow $3.2 million for two years, and the current ($/) exchange rate is $1.60/.

• What swap transaction would accomplish this objective? Assume the counterparties would exchange principal and interest payments with no rate adjustments.
• What savings are realized by both companies