yield measures for fixed rate bonds

bengraham · January 31, 2018, 4:27am

How to solve for APR??

(1+0.0496/2)² = (1+APR/4)⁴

I’m stuck on this. Please help me

MexicanSherlock · January 31, 2018, 4:55am

APR= ((1+0.0496/2)^(2/4)-1)* 4

S2000magician · January 31, 2018, 5:02am

(1 + 0.0496/2)² = (1 + APR/4)⁴

[(1 + APR/4)⁴]^1/4 = [(1 + 0.0496/2)²]^1/4

1 + APR/4 = (1 + 0.0496/2)^1/2

APR/4 = (1 + 0.0496/2)^1/2 – 1

APR = [****(1 + 0.0496/2)^1/2 – 1] × 4

bengraham · January 31, 2018, 7:31am

Thanks for your help. What I did was like this,

0.0496/2 = 0.0248

0.0248 + 1 = 1.0248

1.0248^1/2 = 1.0123

1.0123 - 1 = 0.0123

0.0123 * 4 = 0.0493

The correct answer is 0.10492

Am I missing something here?

S2000magician · January 31, 2018, 2:33pm

If you’ve written the original question properly, the correct answer _ is not _ 0.10492.