I can’t seem to find a way to solve this equation. Can someone break it down for me please
Interest rate swap
SFR3 /1.03 + SFR3 / (1.042 ) + SFR3 /(1.053 ) + 1/(1.053 ) =1
They somehow got SFR3 to equal 4.93%, but I am getting different numbers
What I do is solve for 1/(1.053 ) = .86384
1-.86384 =.13616
now my equation looks like
SFR3 /1.03 + SFR3 / (1.042 ) + SFR3 /(1.053 ) = .13616
Now I just multiple the other side by the denominator
.13616*1.03 * (1.042 ) *(1.053 ) = SFR3 + SFR3 + SFR3
SFR3 = 5.853%
LOL I know this is wrong, cause the book says so. Please help me learn this
SFR3 /1.03 + SFR3 / (1.042 ) + SFR3 /(1.053 ) + 1/(1.053 ) =1
0.97087 SFR + 0.92456 SFR + 0.86384 SFR +0.86384 = 1
2.75927 SFR = 0.13616
SFR = 0.0493
You didn’t substitute 0.13616 for 1 on the RHS and your cross multiplication RHS should have been (1.042 ) *(1.053 ) * SFR + (1.032 ) *(1.053 ) * SFR + 1.03* (1.042 ) * SFR
Here goes:
SFR3 /1.03 + SFR3 /1.042 + SFR3 /1.053 + 1/1.053 =1
SFR3 /1.03 + SFR3 /1.042 + SFR3 /1.053 =1 − 1/1.053
SFR3 (1/1.03 + 1/1.042 + 1/1.053 ) = 1 − 1/1.053
SFR3 = (1 − 1/1.053 ) / (1/1.03 + 1/1.042 + 1/1.053 )
SFR3 = (1 − 0.8638) / (0.9709 + 0.9246 + 0.8638) = 0.049347 = 4.9347%
In general:
SFR = (1 − zn ) / Σ_zi _
breadmaker:
SFR3 /1.03 + SFR3 / (1.042 ) + SFR3 /(1.053 ) + 1/(1.053 ) =1
0.97087 SFR + 0.92456 SFR + 0.86384 SFR +0.86384 = 1
2.75927 SFR = 0.13616
SFR = 0.0493
You didn’t substitute 0.13616 for 1 on the RHS and your cross multiplication RHS should have been (1.042 ) *(1.053 ) * SFR + (1.032 ) *(1.053 ) * SFR + 1.03* (1.042 ) * SFR
This humbled me. I feel small right now. Sorry about that, I think I messed up when I typed it. I updated the .13616. Thank you
Wow. damn. wow. thank you sir.