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D14 Q2 a Keshi co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › D14 Q2 a Keshi co

  • This topic has 1 reply, 2 voices, and was last updated 11 months ago by John Moffat.
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  • March 6, 2022 at 3:53 pm #649986
    humai
    Participant
    • Topics: 741
    • Replies: 238
    • ☆☆☆☆

    In the commentary examiner has written that:

    Doing nothing and borrowing at floating rate minimize interest rate at 4.7% against the next best choice which is swap at 5.04% if interest rate increases by 0.5%. And should interest rate decreases by 0.5% then doing nothing and borrowing at floating rate 0f 3.7% minimize cost compared to next best choice which is 95.5 option

    Sir if instead of above para , I write the following then would it be fine:

    If interest rate increases by 0.5% then doing nothing and borrowing at floating rate gives lowest payment cost and hedge using options gives highest payment cost with the payment cost of swap in between the two. And if interest rate falls by 0.5% then doing nothing and borrowing at floating rate gives lowest payment cost and hedge using swaps gives highest payment cost with the payment cost of options in between the two

    March 6, 2022 at 6:30 pm #650001
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51579
    • ☆☆☆☆☆

    Yes, that makes sense OK 🙂

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