# 2009 CFA Exam #8B

Anyone know what the supporting calculation is? I haven’t seen that before. The fact pattern states the duration of a fixed bond is 75% of its maturity. So based on that, I chose Swap 1 with the following calculations: Duration of fixed side = .75*-4 = -3 Duration of floating = 0.5*.5 = .25 Net duration = -2.75 Obviously this isn’t the proper way, but what is this 1/2/2 business?

Okay, so 1/2/2 refers to the floating side, which is 1/2 of the 2 year swap duration. My question is, why are they taking 1/2 of the swap term? Shouldn’t it be 1/2 of the settlement dates?

floating semi ann ,5/2=.25 quaterly .25/2=.125

alimesoda Wrote: ------------------------------------------------------- > floating semi ann ,5/2=.25 > quaterly .25/2=.125 Thanks, I must be bugging out right now.

bpdulog Wrote: ------------------------------------------------------- > alimesoda Wrote: > -------------------------------------------------- > ----- > > floating semi ann ,5/2=.25 > > quaterly .25/2=.125 > > Thanks, I must be bugging out right now. …not at all, some of us are just getting round to this. the duration of the floating bond is half of the period between payments (expressed as fraction of a year)

if you have quarterly it can range from 0 to .25, so the average would be .125 if you have semi-annual it can range from 0 to .50, so the average would be .25 if you have monthly it can range from 0 to 0.0833, so the average would be .0417