A
abumenang
Member
Hi there,
In this question, how would you know the cashflows received.
Would you just assume that the net result is the life office receiving fixed payments?
Also, in part (i), the acted solutions says that the fixed payments would be set at a level that the npv of swap is zero at outset.
Then part (ii) says the swap results in higher payments to the life company in the early years. This seems contradictory to (i). Please can you explain why this is so?
The question says that this would be a separate contract to the lease & subject to daily collateralisation - how does this relate to the answer?
Thanks.
In this question, how would you know the cashflows received.
Would you just assume that the net result is the life office receiving fixed payments?
Also, in part (i), the acted solutions says that the fixed payments would be set at a level that the npv of swap is zero at outset.
Then part (ii) says the swap results in higher payments to the life company in the early years. This seems contradictory to (i). Please can you explain why this is so?
The question says that this would be a separate contract to the lease & subject to daily collateralisation - how does this relate to the answer?
Thanks.