# Good Sat morning Test Question

For a given 3 day period. Interest rates are 4%, 4.1% and 4%. What is the yield volatility over the 3 day period. a) 5.1233% b) 4.7666% c) 3.4900% d) 1.3700%

B?

The answer is C .Calculate for the percentage(%) changes between Day 1 and Day (4.1-4)/4 = .025 2.Calculate for the percentage changes between Day 2 and Day 3. (4-4.1)/4.1 = -0.0243902 3.Use the two percentages you have now and calculate for the Standard deviation . Mean= 0.0003049 Std Dev = SQRT{(.025-.0003049)^2 +(-0.0243902-0.0003049)^2} =0.0349241

is there a fast way to do that on your calculator? i had stuck in 4, 4.1, and 4 in my calculator and got std dev = 4.714 (but that uses the 3 numbers, not the change from one to the next). for sake of speed on the exam, is there a quick way to punch this into the calculator? i feel like there must be, no?

Bannisja-I don’t know of a quick way to do that.Anybody can throw in your 2 cent on how to do it fast.

You calculator can do it. Look to the manual. I have the HP, which I doubt you have.

Sorry went out to lunch. The answer is C. Nice work. I had to do it the long way as well and my long way was longer than the 3 minutes that were allowed. Since the mean is 0 {[(0.0247)2 +(-0.0247)2]/(2-1)}0.5=0.0349

Missed explanation on the .0247. Took the natural logarithms of the two ratios (4.1/4.0) and (4.0/4.1) which are 0.0247 and –0.0247.

GMofDen- I was thinking you take the Natural log for continuosly compounded returns? and the question did not say that…

I was thinking the same thing^

haven’t found it on the BA2 yet, but the 2nd 5 key (% change) can get you really fast #'s for % change, if you had a bunch of #'s to work through, you i guess could put those into the 2nd data to get the mean, and then you’d have to work through it all. for 2 numbers, i guess this manually isn’t that painful. i’m sure there is a way to do this easily in the BA2 and i just haven’t found it. not the end of the world either way. i do like calculator shortcuts on test day if i’m comfy with them and have used them a lot before. if anyone can do this on a BA2, share the wealth!