On schweser book5, page 300, on the bottom where it values the value of the POUNDS, it uses 6.8% as the fixed rate. They say it’s the value used from the previous questions, calculated from the 1-Z4/Z1+Z2+Z3 forumula. BUT, the dollar fixed payment uses 5.6%/4…which is the 90-day interest rates on the last settlement date. What gives? I’m confused as to what rate to use as the fixed payments? This problem seems to use two different ones.
it’s a receives $ floating and pays L fixed swap, not a fixed for fixed. (top paragraph on pg 300) i have been fumbling through these all day.
ahhh thanks. how long have you been on this reading?
maybe an hour and a half today to read it and do the concept checkers, but on a lot of those i had to peek at the answers. for some reason these just don’t come naturally to me at all. once i do start practicing them, though, i found last year that they get pretty routine. i just forgot how to do them all and am starting over. i think swaps are one of the harder sections in the L2 material to get the hang of. i’m going to practice them until i have them down. derivs in general is an area where it’s tricky, but once it starts making sense, it just clicks. it’s a section that i want and plan to dominate this year, no matter how long it takes me to study.
how much of the derivs did you see coming up last year?