Suppose Telstra Inc. is a high-rated company that can borrow at a fixed coupon rate attached to its bond of 6%. In addition, the bank is willing to extend Telstra's short term loan at a LIBOR-based loan of 80 basis points that will change weekly as LIBOR moves. Working through its principal banker, Telstra contacts JAKS Corp. whose credit rating is relatively lower. JAKS has been informed by its investment banker that it probably could sell bonds at a 14% coupon rate, and a short-term loan that promised a LIBOR-based floating-rate loan of 500 basis points. Using the principle of comparative advantage, explain and illustrate how a swap arrangement would be beneficial to both companies. Assume Telstra has better cost advantage of 55 percent and JAKS has cost advantage of 45 percent as agreed by both companies.