A Thrift Has Funded 10 Percent Fixed-Rate Assets with Variable-Rate

question 23

Multiple Choice

A thrift has funded 10 percent fixed-rate assets with variable-rate liabilities at LIBOR + 2 (L + 2) percent.A bank has funded variable-rate assets with fixed-rate liabilities at 6 percent.The bank's variable-rate assets earn LIBOR + 1 (L + 1) percent.The thrift and the bank have reached agreement on an interest-rate swap with the fixed-rate swap payment at 6 percent and the variable-rate swap payment at LIBOR. What will be the net after-swap cost of funds for the thrift if the cash market liabilities are included in the analysis?

• A)Variable-rate at LIBOR.
• B)Fixed-rate at 8 percent.
• C)Fixed-rate at 1 percent.
• D)Fixed-rate at 2 percent.
• E)None of the options.

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Definitions:

Ainsworth's Strange Situation

A procedure developed by Mary Ainsworth in the 1970s to assess patterns of attachment in young children through observations of their behavior when separated and reunited with their caregiver.

Observations

The act of noticing and describing events or processes in a systematic and objective manner, often used in scientific studies and research.

Researcher

An individual who conducts scientific studies to gain new knowledge and understanding on specific topics.

Behaviorism

A psychological approach that emphasizes the study of observable behaviors and the effects of learning and conditioning.