Question

Bank a has funded 10 percent fixed rate assets with variable rate liabilities at libor +2 percent. Bank b has funded variable rate assets with fixed rate liabilities at 6%. The bank's variable rate assets earn libor +1 percent. Both the banks have agreed on an interest rate swap with the fixed rate swap payment at 6 percent and the variable rate swap payment at libor. What will be the net after swap cost of funds for the bank
a. (outflows of bank a are relevant)

Answer 1

Answer:

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