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A commercial bank has $250 million of floating-rate loans yielding the SOFR plus 2%. These loans are financed with $250 million of fixed-rate deposits costing
A commercial bank has $250 million of floating-rate loans yielding the SOFR plus 2%. These loans are financed with $250 million of fixed-rate deposits costing 4%. A savings bank has $250 million of mortgages with a fixed rate of 6%. These mortgages are financed with $250 million in CDs with a variable rate of SOFR plus 3%. What would be the cash flow goals of each company if they were to enter into a swap agreement?
0.5% | ||
1.0% | ||
2.0% | ||
3.0% |
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