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lignum

This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.

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December 5, 2021 at 1:28 am #642528
mehazia
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1-Forward rate = 142 × (1 + (0.085 + 0.0025)/3)/(1 + (0.022 – 0.0030)/3) = 145.23
please explain why are we dividing it by 3 .
December 5, 2021 at 8:36 am #642568
John Moffat
Keymaster
- Topics: 57
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The interest rates given are (as always) annual rates.
The transaction is in 4 months time, and there are 3 periods of 4 months in a year. So we divide by 3.
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