p********0
发帖数: 186 | 1 Time 0 risk free interest rate 0.04 for 1 year
Year 1 for 1 year interest rate 0.06 0.04
Year 2 for 1 year interest rate 0.08 0.05
What is the value of a 2 year zero coupon bond.
The prof. gave the formula average of (0.04+0.06+0.08)/3 with half
probablity
(0.04+0.04+0.05)/3 the second part. then times year 2. to backout the
discount factor.
But why we need to consider the time 2 interest rate 0.08 and 0.05? it seems
to me we
only need to consider Time 0 and Time |
c******s
发帖数: 90 | 2 Sorry, not trying to be mean but I was so confused
by your description of the question that I almost puked.
Can even YOU understand what you wrote?
seems
【在 p********0 的大作中提到】
: Time 0 risk free interest rate 0.04 for 1 year
: Year 1 for 1 year interest rate 0.06 0.04
: Year 2 for 1 year interest rate 0.08 0.05
: What is the value of a 2 year zero coupon bond.
: The prof. gave the formula average of (0.04+0.06+0.08)/3 with half
: probablity
: (0.04+0.04+0.05)/3 the second part. then times year 2. to backout the
: discount factor.
: But why we need to consider the time 2 interest rate 0.08 and 0.05? it seems
: to me we
|
c***h
发帖数: 80 | 3 don't quite understand ur question
value of 2 yr zero-coupon bond should be 1/(1+r1)(1+r2) , assuming r1 is
the interest rate for 1st yr, and r2 is for second year
seems
【在 p********0 的大作中提到】
: Time 0 risk free interest rate 0.04 for 1 year
: Year 1 for 1 year interest rate 0.06 0.04
: Year 2 for 1 year interest rate 0.08 0.05
: What is the value of a 2 year zero coupon bond.
: The prof. gave the formula average of (0.04+0.06+0.08)/3 with half
: probablity
: (0.04+0.04+0.05)/3 the second part. then times year 2. to backout the
: discount factor.
: But why we need to consider the time 2 interest rate 0.08 and 0.05? it seems
: to me we
|
p********0
发帖数: 186 | 4 OK,
let me ask the same question the other way around
Why the average interest rate over 2 years is the simple average of
short term rate over(time0, time1, time2)???
If I understand correctly, interest rate at time0 are from now till 1 year.
interest rate at time1 is from 1 year till 2 year.
So if I want to get the average interest rate over 2 years horizon, why
isnot it the
average of (r(time0)+t(time1))? |
