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Sembalin Co. June 2012, Kaplan kit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Sembalin Co. June 2012, Kaplan kit

  • This topic has 3 replies, 2 voices, and was last updated 3 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
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  • April 11, 2022 at 10:53 am #653074
    tinkle
    • Topics: 50
    • Replies: 43
    • ☆☆

    Hello SIr,

    Please explain why are we not adding the basis point prior to calculating interest receivable?? why not add 0.6 to the forward rates first??

    April 11, 2022 at 3:14 pm #653087
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49902
    • ☆☆☆☆☆

    Although the bond interest itself is based on the spot yield curve plus 60 bp’s, the swap that is being offered is to exchange a fixed rate for a variable amount based on the yield curve rate (not on the yield curve rate plus 60 bp’s).

    April 11, 2022 at 3:41 pm #653088
    tinkle
    • Topics: 50
    • Replies: 43
    • ☆☆

    What do I look for in such questions to grasp that we do not need to add bps in our working?

    April 12, 2022 at 8:11 am #653127
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49902
    • ☆☆☆☆☆

    It is really down to the wording. However the extra 60bp’s is relevant for the company own borrowings because of their credit risk. General rates (and traded instruments) are not geared just to one particular company and so the company own credit risk is irrelevant.

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