Capital Markets Examiner School, Providence, RI

The Challenge

A borrower wants permanent fixed rate financing for 10- years. The borrower is a good customer that the bank would like to retain; however, the bank prefers floating rate loans.

Client Derivative Interest Rate Swaps

• Borrower wants permanent fixed rate financing for 10-years. Borrower is a good customer that the bank would like to retain, however, the bank prefers floating rate loans.

• Based on creditworthiness and other relationship factors, the bank would price a floating rate loan to this borrower at LIBOR + 2.50%