CHAPTER 3: RATES OF RETURN

Interest-Rate Swaps. Suppose that Yankee Savings Bank pays its depositors an interest rate on six-month CDs that is 25 basis points (0.25%) higher than the six-month Treasury bill rate. Because its assets are long-term fixed-rate mortgages, Yankee would prefer to be borrowing at a ten-year, fixed interest rate. ................
................