A question on Interest Rate
I think that Reiner is basically right: Instead of using the power 8 (which falls short of the 356 days) you would have to use the power 365/44 = 8.295 if you want to have it exact. Thus, you would have (1+0.01*y)^(356/44) = 1.09 => y = 1.010442692% which is slightly lower than your 1.083044% (as expected). -----Urspr?ngliche Nachricht----- Von: r-sig-finance-bounces at stat.math.ethz.ch [mailto:r-sig-finance-bounces at stat.math.ethz.ch] Im Auftrag von RON70 Gesendet: Dienstag, 5. Mai 2009 16:39 An: r-sig-finance at stat.math.ethz.ch Betreff: Re: [R-SIG-Finance] [R-sig-finance] A question on Interest Rate Thanks davidr-2 for your response. However I still have doubt. This means if I deposit $100 then after 44 days I would get $(100+8.662688075), which give rate of return 9% annually? I think you considered annualized return (not very sure) however I want "direct/realized" return from my deposit. Will you please clarify me? Thanks and regards,
davidr-2 wrote:
Assuming Act/Act (this year 365/365), you should have (1 + y/100/(365/44))^(365/44) = (1 + 9/100) => y = 8.662688075 % David L. Reiner, PhD Head Quant Rho Trading Securities, LLC -----Original Message----- From: r-sig-finance-bounces at stat.math.ethz.ch [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of RON70 Sent: Tuesday, May 05, 2009 1:56 AM To: r-sig-finance at stat.math.ethz.ch Subject: [R-SIG-Finance] [R-sig-finance] A question on Interest Rate Please forgive me if my question is too childish however if anyone give me some favor on my problem I would be grateful. I have a deposit with tenor 44 days that gives 9% interest p.a. However I want to calculate rate of return from that deposit for 44 days. Here I proceed as follows. Let say it is y%, then I have following equation : $100*(1+y/100)^8 = $100*(1+9/100) -> y = 1.083044%. Is it correct? However here my doubt is LHS covers only 44*8 = 352 days wherein a year is assumed as 360 days. Therefore there still 8 days missing in my calculation. Therefore I am in dilemma about the correctness of my calculation. Can anyone please suggest if my calculation is ok? Above calculation comes from pricing a forward contract with 44 days maturity. Regards, -- View this message in context: http://www.nabble.com/A-question-on-Interest-Rate-tp23382045p23382045.ht ml Sent from the Rmetrics mailing list archive at Nabble.com.
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