Revision as of 23:33, 4 December 2023 by Admin (Created page with "'''Solution: C''' The qoutes yield is calculated as <math display = "block"> y=\frac{1}{t} \frac{F-P}{P} </math> where <math>t</math> is in fraction of year, i.e. 1 / 6 in this example. Using <math>F=\$ 100,000</math> the current price is $99,009. So the effective annual rate is <math>\left(\frac{\$ 100,000}{\$ 99,009}\right)^6-1=6.15 \%</math> '''References''' {{cite web |url=https://alo.mit.edu/wp-content/uploads/2015/06/PS_Part1.pdf |last1=Lo |first1=Andrew W. |l...")
Exercise
Dec 04'23
Answer
Solution: C
The qoutes yield is calculated as
[[math]]
y=\frac{1}{t} \frac{F-P}{P}
[[/math]]
where [math]t[/math] is in fraction of year, i.e. 1 / 6 in this example. Using [math]F=\$ 100,000[/math] the current price is $99,009. So the effective annual rate is [math]\left(\frac{\$ 100,000}{\$ 99,009}\right)^6-1=6.15 \%[/math]
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.