Hi, On Q53, part of the answer is given out as (723.86/757.09-.9209)-.0499*((.9691+.9209))*100m. Can someone please explain the first part of this equation? Why are we subtracting .9209 from (723.86/757.09)? I’m so confused on this part. Thanks
I am also confused on this part. Anybody know the rationale?
equity return= End value/beg value ( that should be self-exp ) Now the other leg is a fixed leg so the payment = fixed coupon * ( disc factor 1 + dis factor 2) + Par value ( ie 1 ) * discount factor2 years ie .0499*(.9691+.9209) + 1 *.9209 SO MV = 723.86/757 - above fixed leg I havent looked at their ans … but if you think about this way it can help cheers
Ok thanks. So looks like it has to do with discounting the principle that is due at the end of the swap. Thanks.