2. It is September 2020. Bank X has a 1-year maturity fixed rate loan at LIBOR+2. The loan is financed with floating 3-month deposits at LIBOR. The bank wants to earn net income of at least1%, annualized. The spot yield curve is provided in the table below. Term Spot rate September - December 1% December - March 2 March - June 3 June - September 4 a. The bank is considering a cap or a floor. Which should it use? What is the rate the bank wants on the cap or floor? b. If the premium on caps and floors is 2% on an annualized basis, what will net income be for the year, if interest rates change as follows: the three-month spot rate in December, 2020 is 7%; the three-month spot rate in March, 2021 is 12%; and the three-month spot rate in September, 2018 is 2%. 2. It is September 2020. Bank X has a 1-year maturity fixed rate loan at LIBOR+2. The loan is financed with floating 3-month deposits at LIBOR. The bank wants to earn net income of at least1%, annualized. The spot yield curve is provided in the table below. Term Spot rate September - December 1% December - March 2 March - June 3 June - September 4 a. The bank is considering a cap or a floor. Which should it use? What is the rate the bank wants on the cap or floor? b. If the premium on caps and floors is 2% on an annualized basis, what will net income be for the year, if interest rates change as follows: the three-month spot rate in December, 2020 is 7%; the three-month spot rate in March, 2021 is 12%; and the three-month spot rate in September, 2018 is 2%