2. Describe what position you would take with an interest rate cap. Which index (prime or LIBOR) would you use? Explain why. Which strike rate would you use? Explain why. Assume that the bank takes this position. a. Suppose that LIBOR and the prime rate rise by 1 percent after one year and remain at these higher levels the next two years. What will the effective loan yield equal? b. Suppose that LIBOR and the prime rate fall by 0.75 percent after one year and remain at these lower levels the next two years. What will the effective loan yield equal? 2. Describe what position you would take with an interest rate cap. Which index (prime or LIBOR) would you use? Explain why. Which strike rate would you use? Explain why. Assume that the bank takes this position. a. Suppose that LIBOR and the prime rate rise by 1 percent after one year and remain at these higher levels the next two years. What will the effective loan yield equal? b. Suppose that LIBOR and the prime rate fall by 0.75 percent after one year and remain at these lower levels the next two years. What will the effective loan yield equal