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A swap dealer bank makes the following quotes for a swap based on the current 2 year Treasury Note (TN): Years of fixed rate payment
A swap dealer bank makes the following quotes for a swap based on the current 2 year Treasury Note (TN): Years of fixed rate payment 2 Bank pays fixed rate TN Bank receives fixed rate TN+21 basis points +18 basis points The variable rate is six-month LIBOR. The "fixed" rate is the coupon on the TN plus basis points, the TN today is 3.2%. a. Suppose you have an asset with a rate LIBOR + .20%. Show how you could effectively nvert this into a 2-year, fixed-rate asset by accepting the dealer's swap. What is the fixed rate you would earn each six months on your asset (covered by swap)? A swap dealer bank makes the following quotes for a swap based on the current 2 year Treasury Note (TN): Years of fixed rate payment 2 Bank pays fixed rate TN Bank receives fixed rate TN+21 basis points +18 basis points The variable rate is six-month LIBOR. The "fixed" rate is the coupon on the TN plus basis points, the TN today is 3.2%. a. Suppose you have an asset with a rate LIBOR + .20%. Show how you could effectively nvert this into a 2-year, fixed-rate asset by accepting the dealer's swap. What is the fixed rate you would earn each six months on your asset (covered by swap)
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