Page 344 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx
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Chapter 12
End of year Pay swap interest Pay USD 3.025m
to bank (5.5% ×
USD110m × 6/12)
Receive swap Receive CHF 3m
interest from bank
(6% × CHF100m
× 6/12)
Pay Eurobond Pay CHF 3m
interest (6% ×
CHF100m × 6/12)
Swap back Pay USD 110m to
principals (at swap the bank and receive
rate of CHF1 = CHF 100m
USD 1.10)
The net result is that ABC Co has the use of the USD 110 million for the year,
and effectively pays interest on this amount (in USD) at 5.5%.
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