As a swap broker, you are in contact with Banks A and B. The annual yield offered in the fixed rate market is 7.5% for Bank A and 6.0% for Bank B. In the floating rate market, the effective annual return offered is LIBOR+1% for Bank A and LIBOR+2% for Bank B. If Bank A wants to invest in a floating rate asset and Bank B wants to invest in a fixed rate asset, 

show how you can arrange it. Make an interest rate swap that will look equally attractive to both banks and leave a 0.50% margin for your broker.

Answer rating: 100% (QA)

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