A U.S. bank has deposit liabilities denominated in euros that must be repaid in two years. The deposits pay a fixed interest rate of 4 percent. The bank took the money raised and converted it to dollars,whereupon it lent the dollars to a corporate customer that will repay the bank over the next two years in dollars at a variable rate of interest equal to LIBOR +3 percent. The interest rate earned may change every six months.
Design a swap that the bank could use to reduce its risks.

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The Answer of A U.S. bank has deposit liabilities denominated in euros that must be repaid in two years. The deposits pay a fixed interest rate of 4 percent. The bank took the money raised and converted it to dollars,whereupon it lent the dollars to a corporate customer that will repay the bank over the next two years in dollars at a variable rate of interest equal to LIBOR +3 percent. The interest rate earned may change every six months.
Design a swap that the bank could use to reduce its risks.

A US Bank Has Deposit Liabilities Denominated in Euros That Must