Understanding Risk-Free Rate Frequencies
How can “a one-month risk-free rate of 1%, quoted on an annual compounding basis” be understood in simple terms?
Along similar lines, how can one explain “a five-month risk-free rate of 2.5, quoted on a semi-annual compounding basis” or “a nine-month risk-free rate, quoted on a quarterly compounding basis”?
The frequencies make these statements very abstruse. Please help me understand how it works.
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.