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Hi Mr.John
I would like to ask in Sept/ Dec 2020 Q3 of the bank fee of 5 basis point, how does it become 0.5% at borrowing cost?It doesn’t!!
As I explained to you some time ago, 1 basis point is 0.01%. So given that the banks fee is 5 basis points, it adds 0.05% to the cost.
Yeah, Sir. I knew that.
I just wonder why the answer sheet stated for borrowing cost is ( 4.1% + 0.5%) of the bank fees instead of 0.05%?
Sorry – now I have found the part you are referring to 🙂
It relates to using options rather than a swap. Fitzharris borrows at the central bank base rate plus 50 basis points. Therefore, if the central bank rate increases to 4.1%, then they will have to pay 4.1% + 0.5% = 4.6%
It’s nothing 🙂 I appreciate your assistance, Sir.
Now I get to know where the 0.5% comes from.
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