Keshi Co Kaplan kit

See my previous answers: https://opentuition.com/topic/keshi-co-1214-part-a-swap/ The don't have to always have floating interest rates. However here, the question does say that there is increasing uncertainty in the markets. To reduce the risk they will swap floating rate borrowing for fixed rate borrowing.

Your calculation is correct. 1. Remember that K is actually borrowing floating and then swapping (so end up effectively paying fixed. So initially K will be borrowing at L + 0.4% Also, we have calculated that the end result is that K will end up paying fixed interest of 4.94% plus bank changes. To achieve the end result, K will borrow at L + 0.4%. They will receive L from the counter party (so they are now ending up paying L + 0.4% - L = 0.4%). How do they end up paying 4.94% (before bank charges)? Well since so far we have them paying 0.4% they need to pay the difference of 4.94 - 0.40 = 4.54%. It is unlikely that an exam question will ask for the 'settling' up part of it, and even if it does then just showing the end result (without the settling up) will be getting more than the 50% of the marks needed :-)

The 5.04% :-)

You are very welcome :-)