can someone please explain … i get the fixed rate how is the floating rate calculated the way the CFAI answer sheet explained it was kind of weird . Thanks

Company borrows from the bank at the rate of LIBOR +0.5%=5.25% company pays the bank 15,000,000x5.25%x180/360=(393750) company pays for the swap 15milx5.25%x180/365=(388356) company recieve for the swap 15milx4.75%x180/360=356250 356250+(393750)+(388356)=425865 i seriously done know how we are meant to finish all that calculation in 1.5 minutes

Rather than making the 1st and 3rd Calculation, you can simply net the rates and make 1 calculation for floating at 50 basis points (pay to bank @ 5.25% and receive at 4.75%) The second calculation would have to be done since the number of days are different. Also, rather than using 15 million, use say 15000. Lesser time to enter zeroes, lesser confusion and 1 less calculation should save you 30-40 secs easily.

thanks guys!! i honestly give uppppppppp!!! just another mock question , you explained this to me yesterday smileyface and i feel im still doing something wrong in the CFAI mock morning session # 96? Thankssss

Forget about my question … silly mistake !! your explanation yesterday was enough thankssssssssss

I do find myself spend quite a bit longer on these calculation questions. Luckily, the exam contains questions that can be answered in 15 seconds - so it all evens out I guess…

oops nevermind i get it

hey guys…just quick question… Should we use 180/360 to calculate the company pays for the swap instead of 180/365 ? because it clearly says Floating pmt is based on 360 days, and Company is paying LIBOR+.50 which is floating rate. 15milx5.25%x180/360 why we use 365 instead ???