Skip to content
ACCA exam results — Are you ready?Chat about it >>

Ask the Tutor ACCA AFM

sembilan 6/12

Mmisbahkiran7y ago
hi sir i watched your lectures again. now i m bit clear about swap. but in this question the fixed annual rate paid by company confused me. company want to fix the rate. what we do is opposite. company will go for Y+60 and bank with fixed rate of 3.7625 then they swap bank will pay yield company will pay fix 3.7625...but how this amount? now if we see comparative like if company pay fix and bank on yield total is Y+3.7625 and if company pay floating and bank pay fix then its y+4.4625 so first one give low rate and so comparative gain of .6 own company y+.6-.3=y+0.3 bank 3.7626- .3=3.4625 total =y+4.4625 swap company 3.7625 bank y total =y+3.7625 or in this question its different..end result for company is 3.7625 and for bank its y please help
John MoffatJohn MoffatTutor7y ago#1
The 3.7625 is given in the question - it says that Sembilan would pay Ratus a fixed annual rate of 3.76 1/4 %. So they will borrow floating and will pay L + 0.6%. They will received L from Ratus They will pay Ratus 3.7625% They will pay a fee of 0.2% So the total net payment is L + 0.6 - L + 3.7625 + 0.2 = 4.5652%, and this is fixed whatever happens to LIBOR.
Mmisbahkiran7y ago#2
thank you sir now i get it :)
John MoffatJohn MoffatTutor7y ago#3
You are welcome :-)
This topic is locked — no new replies.