Question: shouldnt it be B receive net payments from A when inetrest rate is higher than fixed rate. Pls explain in detials for me pls as
shouldnt it be B receive net payments from A when inetrest rate is higher than fixed rate. Pls explain in detials for me pls as to which is right
6. In December 2005, two parties, A and B, agreed on a three-year fixed-for-floating Australian dollar swap, whereby A received payments based on a floating interest rate and B received payments the fixed rate is 4.95%. The floating interest rte assumed the following values on the payment dates: based on a fixed interest rate. The notional principal is AUD500 000 and Payment date Interest rate Dec. 2006 Dec. 2007 Dec. 2008 4.62 5.08 6.03 Calculate the amounts received by A and B on each payment date. Solution A receives a net payment from B when the interest rate on the payment date is higher tharn the fixed rate of 4.95% and vice versa. Thus, B receives a net amount in 2006, whereas A receives a net amount in 2007 and 2008. The net amounts received by A and B are as follows: Date Dec. 2006 Dec. 2007 Dec. 2008 Interest rate 4.62 5.08 6.03 B receives AUD1650 A receives AUD650 AUD5400
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