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A commercial bank purchased a $100M par, 10-year bond with 4% (semi-annual) coupons, and wants to convert this asset to be LIBOR based. A 10-year
A commercial bank purchased a $100M par, 10-year bond with 4% (semi-annual) coupons, and wants to convert this asset to be LIBOR based. A 10-year interest rate swap is available with fixed rates of 3.48% (bid) and 3.52% (offer), where all rates are semi-annual. i] Specify the swap trade. ii] What variable rate does the bank earn?
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Bank Management
Authors: Timothy W. Koch, S. Scott MacDonald
8th edition
1133494684, 978-1305177239, 1305177231, 978-1133494683
