Derivatives

CFA Level II Derivatives
#1

Could someone please clarify solution to question 5 in TT Whitney.

Here, quarterly payments they calculate and discount as 25,000,000 Eur x 0,023181 x 2,9552 (plus they discount notional 25,000,000 Eur x 0,977422). If these are quarterly payments, shouldn’t they be calculated as 25,000,000 x 0,023181x90/360 x 2,9552 (plus notional 25,000,000 Eur x 0,977422? (I believe this is the approach used in the Schweser example on page 149)

Am I missing something important here less then 2 weeks till the exam?

I would really appreciate clarification on this. Thank you.

#2

Quarterly is the correct. There have been multiple discussions on this here on AF.

Also 2 of the BBs in the book (15 and 16?) are erroneous, they are corrected in the errata.

#3

yes, it should be unannualized rate.

I got an excel spreadsheet to calculate swap values, used it on this question and the numbers are off by 100k euros.

oh well, good thing the numbers for the answers are all quite far apart.

#4

Thank you very much for the above answer.

I am having another dilemma: BB 14 in the book uses formula, which gives 3,375 as correct answer.

When I calculate PV of fixed side, I get 103,389. When I reduce it for the PV of floating (which should be notional of 100,000 because we are at the settlement date) I get 3,389.

Could you please help on this? Is my method of calculating present value wrong or?

Thank you!