Hi all, I am struggling where to convert interest and how? 1. Where do we use annual rate and adjust the time period to say 0.5 for half year. 2. Where do we half the annual rate?
in what context? you could have something like a holding period return. say you buy a stock at $10, it pays no divs, you sell it a month later at $10.5. your HPR = 10.5 - 1/10 = 5%. but let’s say the question asked you what’s your annualized return on the stock. you’d then take the (1.05)^12 - 1 = 79.5856% derivs it’s often the opposite- it’ll give you some annualized rate and you need to adjust it for the shortened time period that you’re working with, be it semi-annual, quarterly, etc. is there a specific q that we can work through that’s confusing?
EAY = (1+ HPR) ^ (365/t) - 1 Bring it back old school