Interest Rate Options - Awan Dec 13

Hi John, I'm just working through this question on Interest Rate Options. I understand how to do the options and I understand the examiner's answer. My question is more about technique. The examiners answer for the option that is not exercised: Investment return (4.79% x 4/12 x $48m) $766,400 Gain on options Zero Premium 0.0021 x $2m x 3/12 x 32 ($19,360) Net Return $747,040 Interest Rate 4.67% So in effect, they take the annual interest rates, work it out in for part of the year and then annualise it up again. My answer was a lot more simple (and quicker!!) and just kept the interest rates annualised, as follows: Interest Paid 4.79% Premium (0.121%) Rate 4.67% If I need to, I can still work out the interest paid by calculating $48m x 0.0467/3 = £747,200, but this particular question didn't ask for that. Doing it this way helps me enormously to get a question like this done in the time, but would I get the full marks for it?! This is the first time I've asked you a question, but just wanted to let you know that you've been a fantastic help with all the many many questions you've answered in the past that I've been able to search, so thanks so much for that. You make the chore of a self studier much much easier :) Roz