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Hi everyone,
I am checking the examiners’ result of Question 3, part b (i) relating to to calculation of the Net result when attending the swap agreement.
I understood the “Gain on swap” and the proportion for each partner but I find difficult to have gained insight of the final result “Net result”.
Could you explain details to have this result?
Thanks all.
For Buryecs Co, you’ve decided that they’ll borrow at 4% fixed. Their Net result will be the variable rate they could have borrowed directly from the bank, less the gain they’ve made by taking the swap
Net result Buryecs Co = Bank rate + 0.6% – 1.2% = Bank rate – 0.6%
For Counterparty, you’ve decided they’ll borrow at Bank rate + 0.4%. Their Net result will be the fixed rate they could have borrowed directly from the bank, less the gain they’ve made by taking the swap
Net result Counterparty = 5.8% – 0.8% = 5%
I hope this helps.
- The topic ‘Currency Swap – Mar/June 2017 – How to get the "Net result"’ is closed to new replies.