Can anyone explain to me where in the question they said the swap in semi annual? And why they use risk free rate not the projected rate to discount the cash flow??
i believe in the curriculumwe always use the projected LIBOR EUROBOR to discount…
thanks
Heres what I think: The question states that yield curves are expected to remain flat thus ruling out any interest rate risk. Does that make sense? This is a weird problem!
check the new mock errata
I thought we were supposed to use the risk free rate? Usually how you discount cash flows
Well can’t you think of it as, the PLN/EUR exchange rate deteriorated (the Euro appreciated), hence the value to PLN would be negative? Maybe I’m over simplifying this here… but got the correct answer? Thoughts, anyone?
The question clearly says to use the spot rates in the table. I wasted a lot of time for this question as having to use the flat yield curve was not clear at all.
Hope a similar question won’t happen in the exam.