Response to the following problem:
Bank 1 can issue five-year CDs at an annual rate of 11 percent fixed or at a variable rate of LIBOR 2 percent. Bank +2 can issue five-year CDs at an annual fixed rate of 13 percent or at a variable rate of LIBOR +3 percent.
a. Is a mutually beneficial swap possible between the two banks?
b. What is the comparative advantage of the two banks?
c. What is an example of a feasible swap?