# [R-SIG-Finance] [R-sig-finance] Plese help me to understand this

Tue Jan 27 18:34:39 CET 2009

```The text is compounding interest but you are not.
HTH,
-- David

-----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 Bogaso
Sent: Tuesday, January 27, 2009 11:27 AM
To: r-sig-finance at stat.math.ethz.ch
Subject: [R-SIG-Finance] [R-sig-finance] Plese help me to understand
this

Hi all,

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
me?

Regards,
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