Related to Mock Exam A, Afternoon Session - Derivatives "Madafi Case scenario"
I have a doubt related to the question number 48 in the Mock Exam A afternoon session “Madafi Case scenario”, Equity Swap Contract, the solution says the following:
A is correct. The quarterly interest rate is calculated as [(1 + 3.2%)^(1/4)] – 1 = 0.0079, so the fixed cash flow Ndlovu receives is ZAR5,000,000 × 0.0079 = ZAR39,528.77 ….
My doubt is: Shouldn’t the 3.2% (the fixed rate) be multiple by * 90/360 (because that is the convention) instead of ^(1/4)? 0.008
Thank you very much in advance for your help.
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