CIMAPRA19-F03-1 Exam - Topic 2 Question 75 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 75
Topic #: 2

HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?

ARisk-free rate +6.9%

BRisk-free rate +8%

CRisk-free rate+3.1%

DRisk-free rate +6.5%

Show Suggested Answer

Suggested Answer: C, D, E

by Rolland at Oct 18, 2023, 01:10 PM

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Crissy

3 months ago

I thought variable rates were riskier. Is this really a good move?

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Glenn

3 months ago

The swap rates are pretty low, so it makes sense to switch!

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William

4 months ago

Wait, how does that add up? I'm not sure about that calculation.

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Elenore

4 months ago

So, they'll effectively pay risk-free +6.9% after the swap? Sounds right!

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Audria

4 months ago

HHH's fixed rate is 10%, and they can borrow at risk-free +8%.

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Jenifer

4 months ago

I believe the net rate would be the fixed rate minus the swap rate. So if we use the bid rate of 3.1%, that might lead us to the right answer, but I'm not entirely sure.

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Naomi

4 months ago

I'm a bit confused about whether to use the bid or ask rate in this case. I feel like it might depend on whether HHH is paying or receiving the swap.

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Page

4 months ago

I think we practiced a similar question where we had to adjust the fixed rate with the swap rates. If I recall correctly, the fixed rate was 10%, and we need to consider the bid or ask rate.

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Fannie

5 months ago

I remember that to find the net rate after the swap, we need to subtract the swap rate from the fixed rate. But I'm not sure about the exact calculations.

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Sherita

5 months ago

I've got this! The net rate will be the risk-free rate plus 8%, which is the spread between the variable rate and the fixed rate. So the answer is B, risk-free rate + 8%.

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Susana

5 months ago

Okay, let's think this through step-by-step. The company is currently paying a fixed rate of 10%, and they want to swap to a variable rate. The bank is quoting a bid of 3.1% and an ask of 3.5%. I think the net rate will be the risk-free rate plus the spread.

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Torie

5 months ago

Hmm, I'm a bit unsure about how to approach this. I'll need to review my notes on interest rate swaps to make sure I understand the concepts.

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Lenny

5 months ago

This looks like a straightforward swap question. I'll need to calculate the net rate based on the given information.

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Anglea

5 months ago

Okay, I've got a strategy for this. I'll start by considering the default field naming conventions in Salesforce, and then try to apply that knowledge to the B2B Commerce context.

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Veda

5 months ago

I think the key difference is that AMP for Endpoints tracks malicious activity on hosts, while the Umbrella Roaming Client focuses on URL-based threats. I'll need to review the details on each product to be sure.

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Lazaro

5 months ago

I always get nervous with these multi-select compliance questions. They want three precise practices that demonstrate robust customer due diligence, right?

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Wynell

10 months ago

Alright, time to put on my best poker face and really focus. This is a tricky one, but I've got this. Let's see, what's the right way to approach this problem?

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Kristin

9 months ago

I'm leaning towards B) Risk-free rate +8%

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Lauran

9 months ago

B) Risk-free rate +8%

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Bettina

9 months ago

I think it's A) Risk-free rate +6.9%

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Sylvia

9 months ago

A) Risk-free rate +6.9%

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Glenn

10 months ago

I'm not sure, but I think the rationale behind A) is that it takes into account the bid and ask swap rates provided by the bank

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Ashton

10 months ago

Haha, this reminds me of that time I got a question about hedging in my finance exam. Took me forever to figure it out, but I nailed it in the end. I'm sure I can do this one too!

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Pearline

9 months ago

User 2

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Sherell

10 months ago

User 1

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Novella

10 months ago

Okay, let's see... HHH Company wants to swap to a variable rate, and the bank is quoting 3.1% bid and 3.5% ask. Hmm, I think the answer might be C, but I better double-check my work.

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