Dreary I am trying to solve the FRA problem in the text book - page 52, Reading 60. I am getting an answer of 8077.68 (using the mechanism outlined in Schweser) while the book seems to be giving the answer to Part C as 8100… Is this purely a rounding error, or have I got it all wrong? My method: *same as schweser) Part 1: .0595 for 360 days = 1.0595 .057 for 180 days = 1.0285 so FRA original value = [1.0595 / 1.0285 - 1] * 360/180 = 0.0603 Part 2: Valuation after 45 days r135 = .059 * 135 / 360 1.022125 r315 = .0615 * 315 / 360 = 1.0538125 So new rate: [1.0538125 / 1.022125 - 1] * 360/180 = 0.0620 Diff on 10 Million $ = [0.0620 * 180/360 - .0603 * 180/360] * 10M = 8515.89 Current value = 8515.89 / [1 + .0620 * 315 / 360] = 8077.68 Is the answer in the book off only due to rounding??
i dont have the text book in front of me right now, but i tried to solve the problem and it seems good to me. cannot find an error in your calculations.
cpk, I think yours is correct, but just change this: The rate on LIBOR 315 days is 6.15%. Current value = 8515.89 / [1 + .0615 * 315 / 360] = 8081, which is the exact answer, even if you use the value formula.
thanks… will remember that.
thanks dreary… discount at current 315-day rate 
yeps - the exact answer is 8081.039. Too much rounding for this reading in CFAI