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could you please show how to work out the fixed rate of 7.75% that B pays A and the floating rate of (Libor+2.5%) that A pays B as they enter in the swap to get that even gain of 0.25%? Thanh you!
Hi, Thien. First, we have to understand that 8 % = 800 basis points. Then, the formula is (800 bps - 600 bps) - (LIBOR + 250 bps - (LIBOR + 100 bps)) = 200 bps - 150 bps = 50 bps. We then divide this by 2 to get 25 bps. I hope this helps!
I love your classes. You make learning heavy concepts so easy :D
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sir, can you please explain where does floating cash flow comes from?
thank you professor
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In your comparative example is it what happen when cies does shadow banking ?
Dear Sir, could you explain the break up of 7.75% that B would pay to A as a simple equation ?
Are you frm holder?
@@chiragpatodi7542 matter of fact I cleared FRM Level 1 in Dec,2021 and a recently qualified CA in May,22.
Thanks for the reply. I am also a CA Finalist. I just want to know your view on FRM cirtification course.
could you please show how to work out the fixed rate of 7.75% that B pays A and the floating rate of (Libor+2.5%) that A pays B as they enter in the swap to get that even gain of 0.25%? Thanh you!
Hi, Thien. First, we have to understand that 8 % = 800 basis points. Then, the formula is (800 bps - 600 bps) - (LIBOR + 250 bps - (LIBOR + 100 bps)) = 200 bps - 150 bps = 50 bps. We then divide this by 2 to get 25 bps. I hope this helps!
AnalystPrep thank you, sir!
Thank you my professor did not do a good job teaching this.
You're welcome!