A bank pays a floating rate of interest on deposits (i.e. liabilities) and earns a fixed rate of interest on loans (i.e. assets). This mismatch between assets and liabilities can cause tremendous difficulties. Explain what type of a swap this bank could use and why?

A bank pays a floating rate of interest on deposits (i.e. liabilities) and earns a fixed rate of interest on loans (i.e. assets). This mismatch between assets and liabilities can cause tremendous difficulties. Explain what type of a swap this bank could use and why?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 23QTD

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