[R-SIG-Finance] [R-sig-finance] Plese help me to understand this
Bogaso
bogaso.christofer at gmail.com
Tue Jan 27 18:25:39 CET 2009
Hi all,
Can anyone please help me to understand, whether there is any difference
between "Zero rate" and "Zero Yield". I thought they are synonymous and both
are used in Zero-coupon bond context. However I got different results in my
textbook while those two are used in different places. Here is the problem :
Case 1. Suppose 5-year spot yield is 7.6 p.a.. Now assume there is a
receivable after 5 year worth $100. Then current value of this receivable is
$100*(1+7.6*5/100)^-1. Am I correct? However in my textbook, it is reported
as $100*(1+7.6/100)^-5.
Case 2. Suppose 6 month spot rate 6.39 p.a.. Now assume there is a
receivable after 6 months worth $100. Then current value of this receivable
is $100*(1+6.39/100/2)^-1. Here my understanding is matching with my
textbook.
Please forgive me as I understand, this question is too fundamental. But
still I think I am missing something important. Can anyone please help me?
Regards,
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