CIMAPRA17-BA1-1 Exam - Topic 1 Question 15 Discussion

Actual exam question for CIMA's CIMAPRA17-BA1-1 exam

Question #: 15
Topic #: 1

An investor has bought a financial asset that pays a variable interest rate at the end of a three-year period At the same time, the invest forward rate agreement (FRA) on an agreed forward rate of 3% at the asset's maturity. What is the advantage of the FRA?

AIf the market interest rate at the asset's maturity is lower than 3%. the bank will pay the investor for the difference in rates

BIf the market interest rate at the asset's maturity is lower than 3%. the asset's maturity will be extended for another year

CIf the market interest rate at the asset's maturity is higher than 3%, the investor will have the option to drop the FRA upon payment

DIf the market interest rate at the asset's maturity is higher than 3%, the investor will be able to receive the higher market rate

Show Suggested Answer

Suggested Answer: A

by Lashaunda at May 05, 2022, 11:05 AM

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Telma

4 months ago

Not sure about B, extending maturity seems unlikely.

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Dortha

4 months ago

A is spot on, protects against lower rates!

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Alfreda

4 months ago

Wait, can you really drop the FRA? Sounds odd.

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Reena

4 months ago

I think D makes more sense, honestly.

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Ronnie

5 months ago

A is definitely the right choice!

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Iesha

5 months ago

Hmm, I'm not sure which option is the best here. I know we need to use an embedded SQL statement, but I'm not familiar with the specific syntax for that. I'll need to review my notes on embedded SQL to figure this out.

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Ardella

5 months ago

I'm a little confused on the difference between Calculation and Formula. I think I'd go with Calculation to get the age, and then either Messaging or Alert to show the error. Not sure which one would be better for this scenario.

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Lezlie

5 months ago

Hmm, I'm a bit unsure about this one. I know bar charts and straight tables can display numerical values, but I'm not sure about the other options. I'll have to think this through carefully.

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Thea

5 months ago

This seems like a straightforward logistics question. I'll focus on the key trade-offs mentioned in the options and think about which one is most critical for a total cost analysis.

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Phung

5 months ago

The Medicare Modernization Act of 2003 seems like a possibility too, especially with all the changes to Medicare around that time.

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