Wentworth National is a well-diversified bank that lends to consumers and corporations. In the past month its credit department received a number of loan applications from different companies. The loan officer is ready to approve 50 applications with a total volume of $100 million. Each loan is $2 million. All loans have equal risk and a fixed interest rate of 5%. All loans have a 5-year maturity. Before sending the final approval to each company, you are asked to find an appropriate funding method. Your team in the liability management department presents the following two options. Note that the amount listed is the exact amount to be raised using this funding option. Libor is currently 2%. Funding option 5-year bond 2-year CD Amount ($million) 100 Interest rate Libor + 80bps 3.5% 100 a. What are the benefits and drawbacks of each option, and which externalities are tied to each option? Note: You don't need to compute marginal profit. (4 marks) b. Choose your preferred funding option and write a short memo to the liability management department motivating your choice. Note: you cannot combine the two funding sources. (4 marks) Wentworth National is a well-diversified bank that lends to consumers and corporations. In the past month its credit department received a number of loan applications from different companies. The loan officer is ready to approve 50 applications with a total volume of $100 million. Each loan is $2 million. All loans have equal risk and a fixed interest rate of 5%. All loans have a 5-year maturity. Before sending the final approval to each company, you are asked to find an appropriate funding method. Your team in the liability management department presents the following two options. Note that the amount listed is the exact amount to be raised using this funding option. Libor is currently 2%. Funding option 5-year bond 2-year CD Amount ($million) 100 Interest rate Libor + 80bps 3.5% 100 a. What are the benefits and drawbacks of each option, and which externalities are tied to each option? Note: You don't need to compute marginal profit. (4 marks) b. Choose your preferred funding option and write a short memo to the liability management department motivating your choice. Note: you cannot combine the two funding sources. (4 marks)