Ok stupid question but here goes, if your option prem is 25,000 (this is in regards to figuring out the effective annual rate for a loan with a cap) and you plan on making the loan in 90 days at a rate of 6 % to get the future value do you do 25,000 * (1+(.06 *90/360)) or 25,000 * (1.06^90/360)? -thanks
25,000 * (1+(.06 *90/360))
^-- correct
when do you have to use ^90/360 instead?
s23dino Wrote: ------------------------------------------------------- > when do you have to use ^90/360 instead? for IRP, for Commodities, anywhere where LIBOR is is not present basically.
imho 
don´t forget cfa uses premium x (1+ (LIBOR + Spread)*90/360) i mean, your 6% would be LIBOR + spread
Which Reading is that? Anyone remembers?
risk management application of options, volume 5
Hala if you have the books can you double check that we compound option using LIBOR and not Rfr?
LIBOR + spread, just in front of me for example, page 180, regarding an interest rate call: “The premium compounded from 14 april to 20 august at the original LIBOR of 5.5% plus 200 bps spread is…”
THANKS. I feel better now. Panic is really settled in and i started double question myself on EVERYTHING. Good thing it is last day at work today and then i have 3 days off!
one advice (as I also took today and yesterday): try to have marks in your books so that you can quickly go back to check something you don´t remember exactly. You can waste a huge amount of time going to the books or tests looking at several pages until you find what you were looking for
To find the terminal value 25,000 * (1+(.06 *90/360)) is correct to find the present value I think they use the factor (1+ risk free rate )^t…ie it assume the amount is compounding.
hala_madrid Wrote: ------------------------------------------------------- > LIBOR + spread, just in front of me > > for example, page 180, regarding an interest rate > call: > > “The premium compounded from 14 april to 20 august > at the original LIBOR of 5.5% plus 200 bps spread > is…” just so we are 110% sure it is compunded by multiplying not by exponent?
multiplying, i have it in front of me, page 180
thanks hala. as a gift i will increase your passing chance from 99% to 99.5%
my last post for a long time today, I am going to check where the exam is this year and if there is any problem to get there by subway, car or whatever enjoy your day guys