Q4.1

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Q4.1

Postby woodeasy » Tue May 25, 2010 3:21 pm

if i solve it as:
exp(0.05*1/2)exp(x*1/2)=exp(0.1*1) => x=15.0%

is this a wrong answer? or just the difference between how the interest is compounded?

thanks!
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Re: Q4.1

Postby mj » Tue May 25, 2010 11:41 pm

When people talk about forward rates they generally mean discrete compounding.
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Re: Q4.1

Postby woodeasy » Wed May 26, 2010 3:02 pm

i c, thanks a lot! :)
mj wrote:When people talk about forward rates they generally mean discrete compounding.
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Re: Q4.1

Postby will0t5 » Sat Jun 12, 2010 7:16 pm

I solved this as:

(1.05)^0.5 * (1+x)^0.5 = 1.1
=> x=15.24%

I believe this is the method used in Heard on the Street (#3.3)
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