CIMA Exam CIMAPRA19-F03-1 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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Wynell

2 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

14 days ago

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

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Lauran

15 days ago

B) Risk-free rate +8%

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Bettina

18 days ago

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

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Sylvia

26 days ago

A) Risk-free rate +6.9%

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Glenn

2 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

2 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

1 months ago

User 2

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Sherell

1 months ago

User 1

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Novella

2 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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