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Good Evening Sir!
i have gone thru all the previous posts on this question but my questions r rather basic:
1. what is a vanilla swap?
2. the 10 year rates available are 5.25-5.4. do these refer to lending and borrowing respectively?regards.
A vanilla swap is what we normally think of with swaps for P4 – where floating interest is swapped for fixed interest.
The lower rate is the interest rate given on deposits, the higher rate is the interest rate charged on borrowings.
hi sir,
sorry if ive missed thos obvious point.
but could you point out as to where this figure came from :-
part b) payments= libor/2 +0.6%
where is 0.6 coming from?
also one last question on this one, whilst calculating the effective annual interest rate , arithmetically rather than putting the figures in the formula , can we just double the interest rate for 6 months which is 3.30% X 2 = which also gives 6.7%?
thanks alot.
i know this is not my place to answer but the 0.6 is given in the question
” as 120 basis points above LIBOR”
so 6-monthly = L/2 + 120/2 = L/2 + .6
ohhh so basically 120 basis points was divided by 2 for 6 months.
ok thanks Mr Mansoor
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