Lignum Co(December '12)

This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.

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September 4, 2017 at 11:54 am #405301
Chidinma
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Hi John,
Please explain why they divided the rates by 3 in deriving the forward rate
September 4, 2017 at 12:30 pm #405333
John Moffat
Keymaster
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The interest rates given are always yearly rates.

They need a 4 month forward rate because the payment is in 4 months time.

So the interest is 4/12 of the yearly rate. (4/12 = 1/3)
September 4, 2017 at 1:10 pm #405343
Chidinma
Member
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Ok thanks.
September 4, 2017 at 4:55 pm #405397
John Moffat
Keymaster
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You are welcome 🙂
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