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!

Bannisja-that was helpful.Thanks !

For your ba ii plus information… not sure if’d use it during the test, but we know it’s there… there is a ton of stuff you can do. http://www.geocities.com/calculatorhelp/tibaiiplus.htm you know what though… it doesn’t answer what bannisja wants. oops. sorry. i’m not an advanced baII plus user, so the functions on this website were an epiphany for me… lame.

no worries! i’m only a moderate calculator shortcutter. for L1 i really tried to learn it all, then only would start to take shortcuts when i knew i could do it out the long way in a jam. there really are a lot of shortcuts in there if you look though. the test does wind up being less calculations than conceptual i think most of the time, so shortcuts won’t get you there if you don’t get the calculations to begin with. i just like to reduce the amount of dumb math errors possible when i can.