2009 Exam 9B Market Value of Forwards - Maple Leaf

CFA Level III Derivatives
#1

I did a search in the forums but didn’t see this specific question mentioned:

Does the discounted MV of Spot and Forwards always use the annualized rates? I don’t know why but I tried to divide each rate by 2 since it’s only for 6-months. AND I raised it to 1/2. Is that wrong? I am getting it mixed up with some other calculations…

#2

If you divide by two and raise to the power of 0.5 you’re double counting for the six month time period. Just raise the annualized rate by 0.5 in that case.

#3

Thanks Wct,

I think I am mixing it up with TVM calculations on the calculator…