Is there a reason one uses one and not the other or are they interchangeable/very similar after rounding?作者: bolligerallstar 时间: 2011-7-13 15:13
this is neverending confusing story
int in your example is rate quoted as quarterly p.a.
in this case you divide the rate by number of periods (here quarters) to get to holding period rate
inf is "quoted" (calculated) as annual rate therefore the compouding ^
you can ask why not devide inf by 4 as int?
the reason is here
1+inf = ((1 + infl)^(3/12))^12/3
1+infl not equal to (1+inf/4)^4
but int is in this case quoted so that if you wanted to know int over whole year you need to calc:
(1+int/4)^4 because there is nothing like 1+int, the int is paid quaryerly
bond equivalent yield uses the same logic - semiannual rate
this is my best explanation作者: comp_sci_kid 时间: 2011-7-13 15:14
If the international Fisher relation holds, your answers under both scenarios should be the same.
NO EXCUSES作者: defour44 时间: 2011-7-13 15:14
and if not作者: ninja1024 时间: 2011-7-13 15:14
the show NY Wrote:
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> and if not
The change in the real exchange rate will not be attributable to inflation differentials. Hence, you have real exchange rate risk.
NO EXCUSES作者: tarunajwani 时间: 2011-7-13 15:14
I know that. I meant in reference to the original Q regarding how to account for the contract being less than one year. It's probably not a huge issue, the numbers are very close.
Edited 1 time(s). Last edit at Friday, May 28, 2010 at 06:56PM by the show NY.作者: chandsingh 时间: 2011-7-13 15:14
the show NY Wrote:
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> I know that. I meant in reference to the original
> Q regarding how to account for the contract being
> less than one year. It's probably not a huge
> issue, the numbers are very close.
I typically use the exponent function, probably won't make a huge difference.
