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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Audria

5 days 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

10 days 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

15 days 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

20 days 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

26 days 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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Odelia

1 month ago

Hmm, I'm a bit confused about the different interest rates and time periods involved. I'll need to carefully work through the details step-by-step.

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Raina

1 month ago

I think I can handle this one. The key is to understand how the FRA works and how it affects the interest payment.

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