Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Interest rate Swaps
- This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- October 11, 2021 at 7:03 pm #637474
I have understood your videos for interest rate swap
MY doubt if if the party requirement of the question Variable or fixed is not given .how to decide which party wants which rate
please explain with example below stating why the the party require fixed or variable or would swap vice versa
in the text book there was a qn where they did not specify what swap or fixed or variable one party wanted to swap or need
just the interest rates were given and with this example Co b had 1 % cheap finance for fixed rate ie co B had interest percentage of 7 and and CO A had 8% fixed finance both had a variable of L+1 L being Libor . they asked how swap could benefit both parties
October 11, 2021 at 9:19 pm #637478I know you have made a vedio on interest rate swaps
please send me a link if i missed the video of this because i dont think you made a video on this where we dont know which interest rate should a company choose just on the differenceand seeing your videos i can make assumptions and learn the concept but i dont feel very comfortable and assured(risky approach ) doing so.things can go wrong if my my assumptions are a bit shaky
October 11, 2021 at 9:24 pm #637479and how to arrive at end result i mean the that being my main doubt not the swap part only how to start and the end result the remaining process is just a balancing act/figure
October 12, 2021 at 7:30 am #637527Questions will usually make it clear as to whether the company wishes to borrow fixed or floating.
However it at least one past exam question it was not made clear. A swap can only be beneficial one way round and so if it is not made clear whether they want to borrow fixed or floating, then you have to check for yourself which way round is beneficial.
You ask for the link to the video, but you wrote that you have already watched the video so I am puzzled.
The videos are all indexed on the main Paper AFM page.
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