1-how do you calculate disc factor if it is semi annually like in this case?
plz tell for atleast 2 yrs periods semi annually as to fig out the chain.
2- why are we not calculating @6.20% even for the period of 6 mnths-1 yr.
2-nd swap questions should be done in excel worksheet or word processor?
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Arnbrook
4y ago#11. You use the formula provided for the discount factor in the normal way (or use the function in the spreadsheet).
6 months is half a year, and so the factor for 6 months at 5.7% is (1/1.057)^1/2
The factor for 18 months is (1/1.062)^3/2
(However the examiner has changed twice since this question was set and I would be very surprised if the current examiner ever expected 6 months etc. discounting.)
2. Because the interest changed to 6.2% p.a. in 6 months time, the interest for the second six months will be at the rate of 6.2% p.a..
3. For each part of a question you are normally presented with either the spreadsheet or the word processor for your answer. Most like for a swap you would be presented with the spreadsheet.
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