Page 24 - CIMA SCS Workbook November 2018 - Day 2 Tasks

CIMA NOVEMBER 2018 – STRATEGIC CASE STUDY

Reference material - letter to Randal Edwards from Mark Morriss

Mark Morriss
Bluetone Bank
Dogsbody Wharf
Cronland City

Dear Mr Edwards

Interest rate swaps

As discussed at our meeting last week, global interest rates are expected to rise over the next few
months. Therefore it is critical that companies with floating rate borrowings consider the
possibility of hedging by fixing interest rates.

Novak’s borrowings with Bluetone Bank are currently subject to a floating rate of Base Rate plus
140 basis points.

However, we do have an interest swap available with the following terms:

Bid rate 2.30%
Offer rate 2.60%
Term 2 years

Please could we set up a meeting next week to discuss whether Novak would like to take up this
swap?

Yours sincerely

Mark Morriss
Corporate Client Manager
Bluetone Bank

40 KAPLAN PUBLISHING