What will be net after-swap cost of funds for tebow trust

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Reference no: EM132053314

Tebow Trust can fund 12.75 percent fixed-rate assets with either variable-rate liabilities at LIBOR + 1 percent or fixed at 12.5 percent. Swamp Bank can fund variable-rate assets with either fixed-rate liabilities at 11 percent or variable at LIBOR + 0.5 percent. Swamp’s variable-rate assets earn LIBOR + 1.25 percent. Tebow and Swamp could agree on an interest-rate swap with the fixed-rate swap payment at 10.75 percent and the variable-rate swap payment at LIBOR .

1. What will be the net after-swap cost of funds for the Tebow Trust if the cash market liabilities are included in the analysis?

a. Variable-rate at LIBOR + 0.25 percent

b. Variable-rate at LIBOR

c. Fixed-rate at 11.75 percent

d. Fixed-rate at 11.50 percent

2. What will be the net after-swap yield on assets for Tebow Trust?

a. Variable-rate at LIBOR

b. Fixed-rate at 1.25 percent

c. Fixed-rate at 0.75 percent

d. Fixed-rate at 1.00 percent

3. What will be the net after-swap yield on assets for Swamp Bank?

a. Variable-rate at LIBOR

b. Fixed-rate at 1.25 percent

c. Fixed-rate at 0.75 percent

d. Fixed-rate at 1.00 percent

Reference no: EM132053314

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