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The answer gave an arbitrage savings of 0.5%. What is arbitrage savings and how would you know you have to calculate for that in the questions since the requirement only asked to evaluate whether or not the proposed swap might be beneficial to all parties.
The arbitrage saving is the saving to be made from swapping.
We need to calculate it because swapping is only beneficial if there is a saving to be made. If both parties were not going to make a saving then it would not be beneficial.
Have you watched my free lectures on swaps?
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