I’m looking at fixed income, example 8 ss12, on swap curve.
How do i calculate s(2)
(s2) / 1.05 + (s2) / 1.062 + 1 / 1.062 = 1
Um . . . algebra?
s2 / 1.05 + s2 / 1.062 + 1 / 1.062 = 1
s2 (1/1.05 + 1/1.062) = 1 – 1/1.062
s2 = (1 – 1/1.062) / (1/1.05 + 1/1.062) = 0.059707 = 5.9707%
well, whatever it’s called, the lack of skill in it is my problem. Cheers!
Best of luck; give it some practice.
Back with a silly question, i knew how to do it for L1 but forgot again;
If the D/E ratio is 0.6 , what is the best way to derive the D/V ratio, or how big a part is D of the total pie.
The easiest way, honestly, is to forget about formulae and just throw in some numbers; make them easy numbers:
E = 10
D = 6
V = E + D = 10 + 6 = 16
D/V = 6 / 16 = _ 0.375 _
Tried to break the derivation of the formula down into easy steps.
D/E + E/E = (D+E)/E
Inputting the D/E ratio of 0.6 into the above, remembering that E/E must always equal 1:
0.6 + 1 = 1.6
Therefore,
(D+E)/E = 1.6
E/(D+E) = 1/((D+E)/E) = 1/1.6 = 0.625
D/(D+E) = 1 - E/(D+E) = 1 - 0.625 = 0.375
Both make sense, but this is how i did it before,
Thanks guys
glad this one is still here :’)
with the MM formula, from the site exercises.
How do i get from
0.15 = r0 + (r0 - 0.08) * (0.6) (the d/e ratio is 1, so don’t mind its omission)
to
0.15 = r0 (1 + 0.6) - 0.048
i get that you multiply r0 and 0.08 with 0.6 to get it out of the brackets, but not how that gets me to r0 (1 + 0.6)
0.15 = r0 + (r0 - .08) * .6 0.15 = r0 + .6r0 - .048 0.15 = r0(1+.6) - .048 Hate to be blunt, but you don’t stand a chance of passing if you can’t do this.