• Skip to primary navigation
  • Skip to main content
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA FM:
  • FM Notes
  • FM Lectures
  • FM Practice Questions
  • Flashcards
  • Revision Lectures
  • Revision Mock Exam
  • FM Forums
  • Ask the Tutor

New! BPP Books for ACCA September 2022 Exams are now available, get your discount code >>

Interest Rate Risk Management – ACCA Financial Management (FM)


Reader Interactions

Comments

  1. JojoBeat says

    May 20, 2022 at 3:35 pm

    Hi Sir, what is there to know about yield curve in interest rate risk management?

    Log in to Reply
    • John Moffat says

      May 21, 2022 at 7:39 am

      For Paper FM you only need to know what is in our free notes and lectures in one of the early chapters.

      Log in to Reply
  2. JojoBeat says

    May 19, 2022 at 4:33 pm

    Hey Sir, what’s the most important hedges for currency and interest rates for the exam?

    Log in to Reply
    • John Moffat says

      May 19, 2022 at 4:53 pm

      They are as I state in the lectures.

      Log in to Reply
  3. Joel1234 says

    January 20, 2021 at 8:09 am

    2.75 paid to x..where did you get that??

    Log in to Reply
    • John Moffat says

      January 20, 2021 at 8:42 am

      It is the missing figure.

      If they didn’t swap, X would be paying 10%. Because there is a saving of 1.5% to be shared equally, X must end up paying 10 – 0.75 = 9.25%.

      When they swap X pays Y’s interest of L + 6.5%, X then receives L from Y.. So far therefore X is paying 6.5%.
      In order to end up paying 9.25%, X must pay Y 9.25 – 6.5 = 2.75%.
      (You can do the same thing for Y and end up with the same transfer)

      However don’t worry about the arithmetic – calculations are not asked until Paper AFM. It is just being aware of the idea for Paper FM.

      Log in to Reply
  4. OnyinyeOfor says

    June 10, 2020 at 3:09 pm

    Thank you Mr John for your lectures. Your explanations drives the point home

    Log in to Reply
  5. accountant-@100 says

    June 2, 2020 at 6:15 pm

    this is great lecture

    Log in to Reply
  6. sohan1992 says

    February 12, 2020 at 7:15 pm

    Love the way you explain with practical examples, and always have an answer for WHY

    Log in to Reply
  7. Janos says

    January 23, 2020 at 10:22 am

    Hi,

    I have not been entirely sure what the mechanism and the real reason behind the movements (interest up and futures down and vice versa). It might have been mentioned in the lecture – sorry if I missed it. But I have found a clear explanation:

    “Effect of Interest Income
    The futures price decreases when there is a known interest income because the long side buying the futures does not own the asset and, thus, loses the interest benefit. Otherwise, the buyer would get interest if he or she owned the asset.”

    Log in to Reply
  8. John Moffat says

    May 27, 2019 at 12:50 pm

    It is the missing figure.

    If they did their own borrowing they would be paying 10%.
    Swapping gives a saving of 1/2 x 1.5% = 0.75%.

    Therefore the settling up must end up with X paying 10 – 0.75 = 9.25%

    Swapping means they will be paying 12%, so they settle up by Y paying X 9.25% which means X ends up paying 12 – 9.25 = 2.75%.

    Remember, however, that as I say in the lectures you cannot be asked to do this calculation in Paper FM – only to explain the idea behind swapping.

    Log in to Reply
  9. njivan28 says

    May 26, 2019 at 3:53 pm

    hello,how did you get that 2.75 y pay to x from?

    Log in to Reply

Leave a Reply Cancel reply

You must be logged in to post a comment.

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy