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What if there is a dealer that offers to: Pay SOFR to receive 100bps OR Pay 95bps and receive SOFR What should the bank in

What if there is a dealer that offers to:

Pay SOFR to receive 100bps

Pay 95bps and receive SOFR

What should the bank in #1 do to hedge its interest rate risk? Be explicit.

What would be the banks resulting net cash flow?

What should the company in #2 do to hedge its interest rate risk? Be explicit.

What would be the companys resulting net cash flow?

Given your responses above to b & d, and assuming it is the same dealer involved in both deals, what would be the dealers net cash flow?

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