Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Interest rate swap
- This topic has 7 replies, 3 voices, and was last updated 7 years ago by John Moffat.
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- December 9, 2016 at 12:27 am #362495
Good day sir
I am having little difficulty with understanding who receive and pay what in an interest rate swap with reference to the article on Acca website currency swap.
In you lecture i understand but in the article not sure how the got barrow receives 2.9% and what he pays etc
December 9, 2016 at 7:26 am #362542If Barrow did their own floating rate borrowing, then they would pay E + 1.5%.
Since there is a saving through swapping of 0.8% each (before the bank fee), they must end up paying E + 0.7% (before the bank fee).
In order to do the swap they borrow fixed at 3.6%, they pay E to Greening (so they are now paying in total E + 3.6%) and so to end up paying E + 0.7% they must receive from Greening 3.6 – 0.7 = 2.9%
December 9, 2016 at 8:44 am #362563Thank you
December 9, 2016 at 2:30 pm #362645You are welcome 🙂
December 10, 2016 at 8:01 am #362960AnonymousInactive- Topics: 0
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Hi
@johnmoffat said:
You are welcome 🙂Hello sir, I wrote the P4 exam yesterday and wanted to know if ACCA will penalise me. I had started the hedging question stuck; I later realised that the NPV was more straightforward so I started answering that but couldn’t finish as time was far spent? I did not cancel any of them as I’ve been told not to cancel answers. Will they penalise me by picking the worst two? I’m really worried here. Thank you
December 10, 2016 at 9:26 am #363004Don’t worry. They will realise what has happened.
December 10, 2016 at 3:57 pm #363127AnonymousInactive- Topics: 0
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@johnmoffat said:
Don’t worry. They will realise what has happened.Thank you sir
December 11, 2016 at 8:07 am #363191You are welcome 🙂
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