This is from Schweser Pratice Exam Vol.1, Exam 1 Afternoon Session (Question 114):
Equity Swap; Quarterly payments, dealer pays a fixed rate of 5.5% to the mutual frund, with payments made on the basis of 91 days in the period and 365 days in the year.
Schweser's Calculation: 5.5% * (91/365) = 1.371%
My calculation: (1 + 0,055)^(91/365) - 1 = 1.344%
That makes a huge difference in the actual question, as the opposite yield is 1.358%.
What's wrong with my calculation? I was really sure that it's the correct way to calculate the yield.
Thx!作者: kamara5 时间: 2011-7-13 16:34
Can anyone help me with this problem?
I think the problem occurs because I think, the fixed rate of 5.5% is an EAY but it is supposed to be a BEY.
But I have no clue why it is the way it is.作者: orang3eph 时间: 2011-7-13 16:34
you need to find the quarterly period rate. The 5.5% is an annualized rate not a compounded rate. It needs to be unannualized and to do this you need to multiply by 91/365 rather than to the ^ of - I think.
