CMA Final · Strategic Financial Management · Swaps
Under a quarterly settled interest rate swap on a notional of ₹20 crore, Kiran Ltd pays fixed 7.4% and receives floating at MIBOR, which is 7.0% for the period. The period has 90 days and interest uses actual/365. What is the net amount Kiran pays on settlement, to the nearest rupee?
Kiran pays about ₹1,97,260 net. The fixed rate exceeds the floating rate by 0.4%, which on ₹20 crore is ₹8,00,000 a year. Applying the actual 90 days over 365 gives the settlement amount, and only this net difference is paid.
- A₹2,00,000
- B₹1,97,260Correct
- C₹1,48,000
- D₹1,92,000
Explanation
The rate difference is 7.4% − 7.0% = 0.4%. Annual net = 0.4% × ₹20 crore = ₹8,00,000. For 90 days on actual/365 it is 8,00,000 × 90/365 = ₹1,97,260. Using a simple quarter (one-fourth of the year) gives ₹2,00,000, which ignores the stated day count.
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