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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Swapping
Sir in swap for eg. A Bank has found a possible counterparty to enter into a swap with ABC Co. The counterparty can borrow
at an annual floating rate of LIBOR + 1·8% or a fixed rate of 6·4%. Bank has quoted ABC Co a notional
fixed rate of 5·9% for it to borrow and the LIBOR is currently 4.8%. So my question is that will we use a fixed rate of 4.8% or 5.9% as the fixed rate for ABC Co when calculating tge potential benefit?
The fixed rate is 5.9% (the 4.8% is LIBOR, which is floating).
Thank you sir john
You are welcome 🙂