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Using examples drawn from business and/or finance, distinguish betweenspeculation and hedging.b) What is a plain...

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Accounting

Using examples drawn from business and/or finance, distinguish betweenspeculation and hedging.b) What is a plain vanilla interest rate swap?(c) Explain in detail how a five year plain vanilla interest rate swap with a notionalvalue of $1,000,000 and a price of 3% can be used: (Illustrate with diagrams)i) To speculate on changes in interest rates;ii) To s hedge against the risk of an increase in interest rates.d) Morgan Ltd entered into a 4-year interest rate swap contract with a financialinstitution with a notational amount of USD 100 million. The contract statesthat Morgan will receive a semi-annual USD fixed rate of 2.5%and in turn payan MRR (market reference rate). For the first 6 months the MRR is 0.85%.Calculate the first swap settlement value from Morgan Ltd.s perspective.

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