dece2011

SpyAli Wrote:
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> Hmm alrite thanks guys. I got it. First one is
> easy to calculate as it ignores the compounding of
> interest whereas Second one will give you the more
> accurate and meaningful answer.


Yes, but do remember the "more accurate and meaningful answer" could give you the wrong price if the "easy" formula was the one used to calculate the discount rate from the market price.

There is one market price, and you have to know which "convention" was used to calculate if you wish to recover the market price from the discount rate.