Hello, I feel terrible that I cannot figure this out but I ran into the following problem with regards to the method to value FRAs prior to maturity. I understand the mothod used in Schweser (p. 25) that prescribes that we need to calculate the new FRA price that would be quoted on a contract covering the same period… and then calculate the interest savings, which to then discount back to the present moment. The method is intuitive and makes sense to me… However, with regards to valuing FRAs prior to maturity, CFAI says only: p.36, “omitting the derivation, the approximate value of the FRA will be” and then goes on to give us the formula. Now, all is good except I prefer the Schweser method but when I apply it to the EOC questions in CFAI, I don’t get the same results as the one in the CFAI answers. The two methods should yield the same results but they don’t (at least for me) and I cannot figure this out… Any suggestions? Thanks in advance for the help! h.

I just wanted to clarify that I do not get the same answer (the CFAI answer) using the “Schweser method” solving pr. 9, b., c. and pr. 10, b., c. on pages 52&53 in CFAI

cfai book in this particular chapter has a lot of rounding issues… the schweser method (as you call it) is fine.

Yep. I tried using CFAI formula for those questions and same issues.