Are you guys using the calculator to compute discount factors/Z’s for Swaps and FRAs? This should be easy in principal but it’s not. Days Rate 180 7.2% 360 8.0% This is what I do to compute discount factors (180, 7.2% as example above) N= 180/360 = 2 I/Y= 7.2 FV=1 PMT=0 PV=? Calculator gives .9658. Book says .9653. So whenever I use the calculator I always overshoot by a little. Anyone know WHY? Thanks.
schweser has a professors note in the swaps section or wherever the discount factor is introduced that says taht on the exams the z will likely be given. take that for what its worth…
instead of doing this – which is really hard, and which is why you are getting the wrong answer N= 180/360 = 2 I/Y= 7.2 FV=1 PMT=0 PV=? try this 1/(1+.072(180/360)) = 1/(1.036 = 0.965251 This is what I do to compute discount factors (180, 7.2% as example above). You do not need to do TVM at all. I guess it is because you are doing TVM you are getting the wrong answer. It really is not TVM.
yeah just take the rate times the 180/360 or whatever, add 1 and hit the 1 over x button. done.