Question: The US technology giant Inc. can borrow USD fixed at 4%. it can borrow GBP (British pounds) at 6.5%. On the other hand, the British

The US technology giant Inc. can borrow USD fixed at 4%. it can borrow GBP (British pounds) at 6.5%. On the other hand, the British firm can borrow GBP at 7% and it can borrow USD at 6%. The exchange rate today is $1.20 (USD/GBP). Suppose British firm wants to borrow 120 million dollars, and US technology giant Inc. wants to borrow 100 million pounds. Is a swap possible? If so, construct the swap that gives the financial institution with 3 basis points.

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