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  1. #1
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    Jul 2009
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    Question Help

    Hi Guys, Any help with this one would be awesome.

    I think it requires some algebra or something.

    If I am looking at a $1,000,000 loan. The fixed rate is 7.34% the variable is 6.03%. If I fix half and half (half fixed, half floating) the average rate is 6.68% (7.34% + 6.03% divided by 2 = 6.68%)

    What percentage (instead of 50:50) of fixed and floating do I need to get to make the average rate 6.305%

    Obviously it will need to be a greater percentage in the floating (6.03%) portion as it is lower and will bring the average rate down to the desired 6.305%.

    So say we had a 25:75 fixed and floating split, the average rate would be 7.34 x 0.25 + 6.03 x 0.75 = (6.3575%) --- I could probably keep trying differnt combinations until I had the correct answer, but I want to know how to actually work it out using algebra

    My stab at algebra for this ended up horribly wrong, but this is what I had

    6.03(x) + 7.34(1-x) = 6.305% where x = percentage of floating portion (therefore 1 - x = fixed portion)

    But I dont know where to go from here (or if i am even on the right track)

    If anyone is a maths guru or knows anyone who is... please help.
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  2. #2
    Member
    Joined
    Jul 2009
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    Thanks
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    what's wrong with your equation? solving it gives
    20.9923664%:79.0076335% fixed:floating

    just dont forget 6.03 and 7.34 are %'s aswell
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