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Hi Sir,
Mar/June 2017 – Q3 (b)(i)
Why the gain on swap (Buryecs – 1.2% and Counterparty – 0.8%) is based on the total interest rate benefit – 2.0%?
However,
Dec 2014 Q2 (a) SWAP,
The gain on swap (Keshi – 0.56%) is based on the difference of interest rate benefit – 0.8%?
It ss because Buryecs has a lower fixed rate and a higher floating rate – to the benefit is the two difference added together.
In the Keshi question, Keshi has a higher fixed rate and a higher floating rate – so the benefit is the difference between the two differences.
However, although the final answers to both questions are correct, I prefer to deal with swaps the way that I explain my free lectures which is more logical and I think easier to understand, as opposed to just learning a rule which is far too dangerous for a paper at the level of the AFM exam.
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