[R-SIG-Finance] [R-sig-finance] A question on Interest Rate

davidr at rhotrading.com davidr at rhotrading.com
Tue May 5 15:27:55 CEST 2009

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
some favor on my problem I would be grateful.

I have a deposit with tenor 44 days that gives 9% interest p.a. However
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?
here my doubt is LHS covers only 44*8 = 352 days wherein a year is
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
pricing a forward contract with 44 days maturity.

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