create a swap contract diagram on this points What is the risk exposure of the bank What would be the cash flow goals of each company if they were to enter into a swap arrangement Which FI would be the buyer and which FI would be the seller in the swap Diagram the direction of the relevant cash flows for the swap arrangement What are reasonable cash flow amounts, or relative interest rates, for each of the payment streams 1 The insurance company pays the bank LIBOR 1 (from their floating rate bonds) 2 The bank pays the insurance company a fixed rate (to be determined based on market conditions) 3 Separately, the insurance company continues to pay 10 on its GICs and the bank continues to pay LIBOR 4 on its CDs

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Question: create a swap contract diagram on this points: What is the risk exposure of the bank? What would be the cash flow goals of each

create a swap contract diagram on this points:

create a swap contract diagram on this points: What is the risk

What is the risk exposure of the bank?
What would be the cash flow goals of each company if they were to enter into a swap arrangement?
Which FI would be the buyer and which FI would be the seller in the swap?
Diagram the direction of the relevant cash flows for the swap arrangement.
What are reasonable cash flow amounts, or relative interest rates, for each of the payment streams?

1. The insurance company pays the bank LIBOR +1% (from their floating-rate bonds). 2. The bank pays the insurance company a fixed rate (to be determined based on market conditions). 3. Separately, the insurance company continues to pay 10% on its GICs and the bank continues to pay LIBOR +4% on its CDs

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