CIMAPRA19-P03-1 Exam - Topic 3 Question 79 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam

Question #: 79
Topic #: 3

M plc has a $2 million loan outstanding on which the interest rate is reset every 6 months for the following 6 months and the interest is payable at the end of that 6-month period. The next 6-monthly reset period starts in 3 months and the treasurer of M plc thinks that interest rates are likely to rise between now and then.

Current 6-month rates are 7.2%and thetreasurer can get a rate of 7.7%for a 6-monthforwardrateagreement (FRA) starting in 3 months' time. By transacting an FRA thetreasurer can lock in a rate today of 7.7%.

If interest rates are 8.5%in 3 months' time,what willthe net amount payable be?

Give your answer to the nearestthousand dollars.

A$77000

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Suggested Answer: A

by Genevive at Jan 28, 2026, 02:32 AM

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Almeta

1 month ago

Total payable would be $107,000. It’s all about the interest difference!

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Paulina

2 months ago

If rates hit 8.5%, we need to calculate the difference.

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Amie

2 months ago

I think the FRA is a good move. Locking in 7.7% seems smart.

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Avery

2 months ago

This question is tricky. I feel a bit anxious about it.

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Elliott

4 months ago

Totally agree, locking in at 7.7% seems smart!

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Rebbeca

4 months ago

Wait, how can we be sure rates will actually rise?

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Rebbecca

4 months ago

If rates hit 8.5%, that’s a big jump!

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Margery

4 months ago

Current rate is 7.2%, but FRA locks in at 7.7%.

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Reid

4 months ago

The loan amount is $2 million with a 6-month interest reset.

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Ruthann

4 months ago

Forget the numbers, I'm just here for the free coffee and donuts.

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Michal

5 months ago

If I can't use a calculator, I'm just going to guess and hope for the best.

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Lenna

5 months ago

Wait, we're supposed to do math? I thought this was a multiple-choice quiz on astrology.

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Aleshia

5 months ago

Hmm, 8.5% in 3 months? Time to break out the crystal ball and predict the future!

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Mona

5 months ago

7.7% is the way to go, lock it in and avoid the 8.5% hike!

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Andree

5 months ago

I feel like we did a problem where we had to determine the impact of a rate change on loan payments. I hope I remember the formula correctly for this one!

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Hana

5 months ago

I think the loan amount is $2 million, so we’ll need to calculate the interest based on that. But I’m a bit confused about how to apply the rates.

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Audria

6 months ago

If rates go up to 8.5%, we’ll need to compare that with the locked-in rate of 7.7% to find the difference, right?

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Ezekiel

6 months ago

I remember we practiced calculating the net amount payable in a similar question, but I’m not sure how to factor in the FRA correctly.

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Tiera

7 months ago

I'm feeling pretty confident about this. As long as I plug the numbers in correctly, I should be able to get the right answer.

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Kristel

7 months ago

This looks tricky, but I think I can figure it out. I just need to make sure I'm keeping track of all the dates and rates correctly.

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Fernanda

7 months ago

Okay, let me break this down. We have a $2 million loan, the current 6-month rate is 7.2%, and the treasurer can lock in a 7.7% rate with an FRA. Then we need to calculate the net amount payable if rates are 8.5% in 3 months.

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