This topic contains 1 reply, has 2 voices, and was last updated by John Moffat 2 years ago.
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
You must be logged in to reply to this topic.
OpenTuition.com Free resources for accountancy students
Free ACCA lectures and course notes | ACCA AAT FIA resources and forums | ACCA Global Community
Home › Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA P4 Exams › Yield Curve
This topic contains 1 reply, has 2 voices, and was last updated by John Moffat 2 years ago.
Kindly ask you to assist, again!:)
Q4 on Pilot Paper relevant up to Dec 12
We are given the nominal 30 year yield curve (graph) and yield spreads (table).
How can we extract the risk free interest? I saw in the answer sheet there are different interest free rates depending on the maturity.
I think that based on graph if the cross point (3,7% yield, 2 years) is on the yield curve that means that the 2 years free risk rate is 3.7- 35 -basis points (base on the 2 years spread from the table)= 3.35%. But we need the free interest rate for 3 and 10 years? Can we extrapolate something to find it out?
Thank you!
Your first sentence of your second paragraph is correct 🙂
However to get 3 and 10 years, it is not possible to extrapolate – you have to read it from the graph as best you can (and for this reason the answer is only approximate, although the graph has been drawn pretty accurately).
You must be logged in to reply to this topic.