There are two companies, Company A with a high credit risk and Company B with a low credit risk, are considering an interest rate swap. Each can borrow at the following rates. Company A Fixed Rate 8%, Variable Rate 5%. Company B Fixed Rate 12%, Variable Rate 7%. An interest swap would be beneficial to both parties if:

Company A wants to borrow at the fixed rate and the HCR firm wants to borrow at the variable rate

Company B wants to borrow at the fixed rate and the LCR firm wants to borrow at the variable rate

Both firms want to borrow at the variable rate.

None of the above

2. A bank estimates that their average balance on demand deposit accounts is $2,000, net of float. Each account costs the bank $150 per year in processing costs. The bank collects an average of $7.50 per month on each account for service charges. Assume reserve requirements are 10% What is the net cost of an average demand deposit?

3.0%

3.3%

3.6%

3.9%