- 4 Marks
FM – Nov 2020 – L3 – Q4b -Interest Rate Risk Management
Calculates the six-monthly fixed interest payment for a loan under a swap arrangement to secure a fixed interest rate.
Question
b. A plc wants to borrow N200 million for five years with interest payable at six-monthly intervals. It can borrow from a bank at a floating rate of NIBOR plus 1% but wants to obtain a fixed rate for the full five-year period. A swap bank has indicated that it will be willing to receive a fixed rate of 8.5% in exchange for payments of six-month NIBOR.
Required:
Calculate the fixed interest six-monthly payment with the swap in place. (4 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: fixed interest rate, floating vs fixed rate, Hedging, Interest Payment, swap calculation
- Level: Level 3
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