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Swap

This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.

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March 3, 2024 at 8:34 am #701823
phuongmore
Participant
- Topics: 132
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In SD20, when comment on the disadvantage of swap (Fitzaharris Co) , the examiner wrote :
“As swaps are OTC instruments, they cannot be traded or allowed to lapse if they are not needed”.
In SD16, when advise on the value of swap ( Pault Co), the examiner wrote:
“Pault may choose to take out another swap then on different terms or let the arrangement lapse and pay floating rate on the loan…”.
I am confusing whether swap could be allowed to lapse or not ? Please explain. Thank you.
March 3, 2024 at 12:12 pm #701842
John Moffat
Keymaster
- Topics: 57
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The swap agreement is for 4 years. At the end of 4 years it finished and the answer is referring to whether they should then enter into another swap or not.
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