This may be a very stupid question, but why when calculating a linear interpolation is the 2nd term divided by 0.5 as in the following…(which comes from Schweser notes book 4, page 152)
1.6 year swap rate =
1.5 yr swap rate +[0.1 (2yr swap rate - 1.5yr swap rate)/0.5]
^
Because 0.5 is the difference b/w 2 and 1.5 years
Yup, fatigue definitely setting in now!!!
^No worries mate - take a break, I took the entire easter week off to prepare, relax and when I’m bored, AF
Ha Ha. Feeling stupid is surely part of the deal with clearing L2. Nice stories to tell your junior analysts!
I had the same issue, racked my brains for 20 mins figuring out 0.50 somewhere explicitly mentioned in the question .
Thanks.