2015 Morning (but actually a PM style) Mock Q53 -

[Enemyofmyenemy]

I’m struggling with this one. By entering into a reciever swap (pay floating, recive fixed), won’t this increase the sensitivity to interest rates?
Is it becuse TCMS is already paying a fixed rate loan, that the addition of the swap results in cancelling out the fixed portions and replaces them with paying floating, which decreases the interest rate sensitivity? …. arg.

 

[pokhim]

Enemyofmyenemy wrote:
I’m struggling with this one. By entering into a reciever swap (pay floating, recive fixed), won’t this increase the sensitivity to interest rates?

No

Enemyofmyenemy wrote:
Is it becuse TCMS is already paying a fixed rate loan, that the addition of the swap results in cancelling out the fixed portions and replaces them with paying floating, which decreases the interest rate sensitivity? …. arg.

Yes