Book 4. SS14 Problem 10 Schweser earlier, should, LIBOR, discounted

transferpricing

Why are they doing .05 - .045? for the first part. The text earlier in the book did not use Libor AND the added BPs until the discounting part (ex/ LIBOR + 150bps). But now they use LIBOR +added BPs for the first part? What gives?

Following the text, it should be .05-.03*500000 -> 100000/(1.03+.015) and then discounted by (1.028)^5/12

IAmNeil

Problem was already discussed. Schweser calculations regarding the FRA are definitly not market standard. Similar calc is Not appearing anywhere in CFAI books - would simply ignore the numbers and concentrate on fundamentals regarding credit risk on the various Instruments.