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- This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
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- November 3, 2018 at 8:52 pm #483695
Hello Sir!
My query is regarding the question on interest rate swaps.
In your lecture on interest rate swaps,all seemed easy and well understood. But here when I work using your approach, I’m getting a different answer compared to the examiner’s.
I worked this way,if I’m wrong somewhere please do specify:
Under own borrowings, we add 8.75% of S’s fixed rate with L + 0.90% of E’s floating rate giving us a total of: L+9.65%
Then under swap borrowing, we take the addition of L+0.50% of S’s floating rate with 9.50% of E’s fixed rate giving us a total of L+10%
Next, we subtract the difference between the swap borrowings and own borrowings giving us a SAVING of 0.35% which is split into 2: 0.175 each.
The end result would therefore be:
S ([8.75 + 0.05]-0.175) = 8.625%
E ([L+0.90 + 0.05]-0.175) = L+0.775%Thank you.
November 4, 2018 at 10:20 am #483749Sorry, but I do not know what mock exam you are referring to.
The only mock exams that I have are those in the current edition of the BPP Revision Kit, and it does not seem to be in any of those mock exams.
November 4, 2018 at 5:47 pm #483805The question can be found in this link:
It is located in qn 2 (b)
Thank you.
November 5, 2018 at 7:58 am #483848Please do not post links to copyright material on this website. This exam is copyright of BPP and it is illegal for us to have links to it.
Presumably you are paying this website for access to their materials and so they should be able to give you an explanation.
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