ah…perfect… thanks for that example mr. cpk!!!
cpk is gonna nail this one, more power to to you sir!
Dinesh, How sure are you on this conclusion: “It’s always Semi-Annual unless otherwise specified. Even zero coupon bonds are to be valuated semi-annually.” Steve
Steve – I believe Joey came back immediately there after on the thread – and either way would give you the same number in this problem. When they give 6 monthly rates as .5,1,1.5 and so on, then definitely the 1/2 year, multiply by 2 convention is required. Otherwise - use the 1 year, no multiply option. CP
steve111 Wrote: ------------------------------------------------------- > Dinesh, > > How sure are you on this conclusion: > “It’s always Semi-Annual unless otherwise > specified. Even zero coupon bonds are to be > valuated semi-annually.” > > > > Steve C’mon - I’m totally sure that’s not right unless the CFA curriculum is trying hard to avoid the e thing (that 2.71828 number).
I just want to make sure I got the concept clear. Thanks Guys.
dinesh.sundrani Wrote: ------------------------------------------------------- > JoeyDVivre Wrote: > -------------------------------------------------- > ----- > > That’s because the more you compound it, the > > closer you get to continuous compounding. > > Is this because as the the effective yield will > increase to a maximum value of ??? > > - Dinesh S Yep except it’s as compounding frequency goes to infinity. Use L’Hopital to show lim ( 1 + x/n)^n -> e^x as n -> inifnity