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Apple Inc. wants to borrow pounds, & Virgin Airlines wants to borrow dollars. Because Apple is better known in the United State, it can borrow on its own dollars at 7 percent and pounds at 9 percent, whereas Virgin can borrow dollars at 8 percent & pounds at 8.5%.

Assume Apple wants to borrow £10 million for two (2) years, Virgin wants to borrow $16 million for two years, & the current ($/£) exchange rate is $1.60. What swap transaction would accomplish this objective? Suppose the counterparties would exchange principal and interest payments with no rate adjustments.

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