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Suppose a bank borrows funds by issuing CDs with a variable rate equal to the T-Bill rate plus 0.5%. The bank has the opportunity to
Suppose a bank borrows funds by issuing CDs with a variable rate equal to the T-Bill rate plus 0.5%. The bank has the opportunity to invest in a 7-year loan that will pay 7% fixed interest. Describe a swap position that would lock in a 1% spread between the cost of the CDs and the return on the loan.
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