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Q2) Bank 1 has $500 million of floating rate loans yielding the LIBOR rate plus...

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Q2) Bank 1 has $500 million of floating rate loans yielding the LIBOR rate plus 1.5 percent. These loans are financed by $500 million of fixed-rate deposits costing 8 percent. Bank 2 has $500 million of mortgages with a fixed rate of 12 percent. They are financed by $500 million of CDs with a variable rate of LIBOR plus 3 percent. a. Do you think a feasible SWAP between these two banks? Explain why b. If the SWAP is feasible then what would be the spread this SWAP will generate? c. Show a detailed calculation of feasible SWAP

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