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

question 40

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 yield on assets for the bank?

• 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 above.

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Definitions:

Back Propagation

Reverse movement of an action potential into the soma and dendritic field of a neuron; postulated to play a role in plastic changes that underlie learning.

Action Potential

A temporary reversal of an electric polarization of the membrane of a nerve cell or muscle cell, allowing for the transmission of signals.

EPSP Reversal

A phenomenon where the excitatory postsynaptic potential changes direction, usually due to alterations in ion gradient or membrane potential.

Neural Plasticity

The ability of the brain's neural networks to change through growth and reorganization, in response to learning or experience.