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

Bogaso bogaso.christofer at gmail.com
Tue Jan 27 18:56:54 CET 2009

```But Zero rate semblances with Zero coupon bond, where all Interests will be
paid at maturity. Then why it is compounded annually?

davidr-2 wrote:
>
> 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,
>
> 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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