[R-SIG-Finance] [R-sig-finance] A question on Interest Rate
Adams, Zeno
Zeno.Adams at ebs.edu
Tue May 5 17:02:47 CEST 2009
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).
-----Ursprüngliche 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,
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