S’14 Case Effective Interest Rate Calculation – Josil Effective Interest Rate Calculation – Co. X Bank Loan Euribor + 1.25% Bank Loan 5% Swap – Receive (Euribor +1.25%) Swap – Pay Euribor +1.25% Swap – Pay 4.25% Swap – Receive (4.25%) Effective Rate 4.25% (excl. fee) Effective Rate Euribor + 2% (excl. fee) Josil have effectively hedged their floating Co. X have effectively changed their fixed rate loan into loan into a fixed rate exposure using a swap a floating rate exposure using a swap
S’14 Case Effective Interest Rate Calculation – Josil Bank Loan Euribor + 1.25% Swap – Receive (Euribor +1.25%) Swap – Pay 4.25% Effective Rate 4.25% (excl. fee) Josil have effectively hedged their floating loan into a fixed rate exposure using a swap Effective Interest Rate Calculation – Co. X Bank Loan 5% Swap – Pay Euribor +1.25% Swap – Receive (4.25%) Effective Rate Euribor + 2% (excl. fee) Co. X have effectively changed their fixed rate loan into a floating rate exposure using a swap
Swap-Diagram-Focus-Session.docx