Explain the advantages and disadvantages of irs

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Reference no: EM13924810

The CFO of XYZ Ltd has taken a 5 year term loan of $300m at 8% per annum. After studying recent central bank policies and economic conditions, the CFO is of the opinion that interest rates should fall and accordingly the 8% interest rate will soon be higher than the going market rate. Having failed to renegotiate the rates with the current bank, the CFO has the choice to go another bank, which will be a time consuming process. Having heard about IRS, he is curious to know how it will help him. A financial institution has agreed to enter into an IRS for LIBOR+2%. Could you please share your views with the CFO?

Explain the advantages and disadvantages of IRS.

Reference no: EM13924810

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