They are compounding instead of discounting back… this has to be a mistake right? ( let alone they are using a rate of 0.119% instead 1.19%…)
You are correct
PV difference at expiry = 3452.086 - 3402.49 = 49.596
We then need to discount and they have used too many zeros fir risk free 1.19% = 0.0119 as in first line of their calcs not 0.00119 as in second.
49.596 / e ^ (0.0119 x 0.0833) = 49.546
I used excel so rounding may be different.
In there actual calculations as oppsoed to printing, I think this just got the disocunting and compunding wrong but used the correct rate.
Hey Mikey, I wish I became a CFA :), still an L2 candidate. This post was a month ago ( I think you are confusing oct 12 as in 2012) anyway, thanks for replying. they are simply compounding it, meaning they take (3452.086-3402.49) multiplied instead of divide e ^ (0.0119 x 0.0833). I believe this is what cfa is doing here as a mistake.
That is my britishness letting me down again. We do the dates all different.
I think you are corrrect and they are wrong and you explaantion in bold is correct.