CMA Final · Strategic Financial Management · Swaps
A swap of ₹50 crore notional has a 6-month reset. Party A pays fixed 7.4% p.a. and receives 6-month MIBOR. At a reset date, MIBOR is 7.0% p.a. Using a 180/360 day count, what is the net settlement for that period?
A pays a net ₹10 lakh. The fixed rate exceeds floating by 0.4% a year. On ₹50 crore for half a year, 0.4% gives ₹10 lakh, and the fixed payer settles the difference.
- AA pays ₹10 lakhCorrect
- BA receives ₹10 lakh
- CA pays ₹20 lakh
- DA pays ₹37 lakh
Explanation
Net rate = 7.4% - 7.0% = 0.4% p.a. Half-year amount = 50 crore × 0.4% × 0.5 = ₹10 lakh, paid by A because the fixed rate exceeds the floating rate. The ₹20 lakh option uses the full year instead of six months.
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