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Illustration 2 – Hedging Interest Rate Risk – Kaplan Study Text

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Illustration 2 – Hedging Interest Rate Risk – Kaplan Study Text

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  • July 13, 2023 at 11:17 am #687925
    Gajendra
    Participant
    • Topics: 1
    • Replies: 7
    • ☆

    Hello sir,
    I don’t understand why the FRA of 4.54% would be appealing to Stone Co. when it can borrow for two years at 4.25% now?

    Also, I dont understand the equation 1.0396 × (1 + r) = 1.0425^2.

    Thanks in advance.

    July 13, 2023 at 4:45 pm #687942
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54727
    • ☆☆☆☆☆

    I do not have the Kaplan Study Text and so I do not have the question that you refer to.

    If it is a short question and you can type it out, then I should be able to explain.

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