Confusion about interest rate in Future/FRA

Recall that the interest rate on the Derivative section, some calculation we have (1+RFR)^T … so say we are giver an annaul rate of 12% , then the quarterly rate will be (1.12)^(1/4) =~ 1.0287% However in some other section, I see Schweser simply divide it up (e.g. bk 5 page 129), and the rate is 1+ .12 / 4 = 1.03 I wonder if anybody knows the differences and which to apply at what time? -Thanks :slight_smile:

i think the ones where they simply derive it by diving by four, are when they are quoted as BEY (bond equivalent yields) risk free rate is not usually BEY, so if you have the annual and want quarterly, you can’t just divide by four… someone correct me if i’m wrong…although…i’m never really wrong :wink: (Ha!)

you divide when you use them for FRAs compound at ^ for everything else…