(Cik Salmy a very wealthy individual just heard the rumours that interest rates are likely to...

 

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(Cik Salmy a very wealthy individual just heard the rumours that interest rates are likely to decrease over the next 2 years. He intends to enter into an Interest Rate Swap agreement in order to profit from decreasing rates.) 1(What should Cik Salmy position be in the swap? 2(Assuming the notional principal is RM 10 million, and 6-month reset frequency, determine his profit or loss if rates increase 2% over the first 6 months. (At initiation assume the current floating rate equals the proposed fixed rate). 3(What is her profit or loss if interest rates fall to 1.5% over the first 6 months?) (Cik Salmy a very wealthy individual just heard the rumours that interest rates are likely to decrease over the next 2 years. He intends to enter into an Interest Rate Swap agreement in order to profit from decreasing rates.) 1(What should Cik Salmy position be in the swap? 2(Assuming the notional principal is RM 10 million, and 6-month reset frequency, determine his profit or loss if rates increase 2% over the first 6 months. (At initiation assume the current floating rate equals the proposed fixed rate). 3(What is her profit or loss if interest rates fall to 1.5% over the first 6 months?)

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Cik Salmys position in the interest rate swap should be as the receiver of fixed interest payments a... View the full answer