Your bank is looking for the lowest cost two year
Your bank is looking for the lowest cost two year, fixed rate financing. It has decided to issue four consecutive three month Eurodollar time deposits on balance sheet and hedge the future borrowing costs by taking positions in the market for basic interest rate swaps. What positions are appropriate? Use the data from Exhibit 9.8 to demonstrate how swaps might be used to fix the bank’s borrowing cost over two years.
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