Question 2a
Marking Guide
Options
Buy put options 1
Number of contracts 1
Basis calculation 1
Premium calculation 1
Exercise option? 1
Final outcome 1
Swaps
Comparative advantage and recognition of benefit 2
Initial decision to borrow floating by Lurgshall Co and fixed by counterparty 1
Swap impact 2
Net benefit after bank charges 1
Comments 3–4