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Fitzharris Co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Fitzharris Co

  • This topic has 1 reply, 2 voices, and was last updated 9 months ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 2, 2022 at 5:09 am #654746
    Sharmaarke
    Member
    • Topics: 5
    • Replies: 8
    • ☆

    Hi sir, I watched your lecture on Swap and tried to do Swap question Fitzharris Co Sep/Dec 2020.
    In the lecture example, we knew Co X what to borrow Fix rate and Co Y want to borrow Floating

    but in the Fitzharris question How we know which rate( fix or floating) Fitzharris Co and counterparty want to borrow?

    In the Answer, Fitz want to borrow Fixed and the counterparty want to borrow Floating but I down know how I’m supposed to know that?

    May 2, 2022 at 7:14 am #654751
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51585
    • ☆☆☆☆☆

    The first paragraph does suggest that they would normally be borrowing at floating rate but wants to hedge the risk which suggests a swap so as to end up paying a fixed rate.

    However it is not as clear as it could be, but a swap can only be beneficial one way round. So if it is not immediately clear which way they are swapping then it does not take many seconds to look at the total both ways round and see which way round ends up giving an overall saving.

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