Floating rate loans yielding the t-bill rate plus

Assignment Help Financial Management

Reference no: EM13933131

A commercial bank has $200 million of floating rate loans yielding the T-bill rate plus 2%. These loans are financed by $200 million of fixed-rate deposits costing 9%. A savings association has $200 million of mortgages with a fixed rate of 13%. The mortgages are financed by $200 million of CDs with a variable rate of T-bill plus 3%.

a) What type of interest rate risk does each financial institution face?

b) Describe a swap that would be advantageous for each financial institution.

c) Demonstrate how the swap arrangement (from part b) would be acceptable to both parties. (Show cash inflow/outflow rates)

Reference no: EM13933131

Questions Cloud

Calculate breakeven point in units at each of selling prices : The Pointer Appliance Company is investigating the additional of a new and improved pulsating blender to its line of consumer appliances. The product chops, grinds, grates and blends smoothies twice as fast as all other blenders on the market. The bl..

Explore facebook paying close attention to how technology : Explore the Facebook paying close attention to how the technology enables the members of Facebook to communicate and collaborate. What findings show how the collaboration theory is being used within Facebook to keep members engaged in the communic..

Calculate the residuals and plot them against educ : Obtain summary statistics and histograms for the variables WAGE and EDUC - Calculate the residuals and plot them against EDUC. Are any patterns evident and, if so, what does this mean?

What social learning theorists predict about group behaviour : What would social learning theorists predict about group behaviour in the next session? Describe how Multidimensional or Systems Views could be applied to solutions for Karen's developmental concerns.

Floating rate loans yielding the t-bill rate plus : A commercial bank has $200 million of floating rate loans yielding the T-bill rate plus 2%. These loans are financed by $200 million of fixed-rate deposits costing 9%. A savings association has $200 million of mortgages with a fixed rate of 13%. What..

Determine the amount of cost of goods sold : Prepare a schedule to determine the amount of cost of goods sold.

Write a brief assessment of the individual client : Identify what other questions you might ask her in order to explore the biological, developmental, and psychological components of assessment.

Describe the process of photosynthesis : Describe the process of photosynthesis and the use of the bi products of respiration

How would you summarize your lifes experiences : In paragraph form, answer the following questions that may affect how you think about presentations, your topics, and your audience: What is your "story"? How would you summarize your life's experiences

User Account

All Pages