Simple Compouding Rate
- Thread starter sathyat
- Start date
Hi Sathya,
I'm sorry, to where are you referring, is this formula?
Generally, these compounding conventions come from Tuckman Chapter 4.
I hope i didn't say/write "simple compound rate," it contradicts itself.
simple is without compounding: $12 on $100 = 12% simple interest
On the second, where is the example to which you refer, I can't find it
David
I'm sorry, to where are you referring, is this formula?
Generally, these compounding conventions come from Tuckman Chapter 4.
I hope i didn't say/write "simple compound rate," it contradicts itself.
simple is without compounding: $12 on $100 = 12% simple interest
On the second, where is the example to which you refer, I can't find it
David
Hi Sathya,
I got that from Tuckman 4.11 - the AIM refers to Tuckman 4.11
(but it's 181/360, right?)
I think the phrase there "simple compound rate" is an error. Technically, i think it's an error b/c it's an oxymoron. Simple implies no compounding. Apologies.
Should just be "simple rate"
where simple rate = [1/2 of his semi annual rate or his r] * 360/181
the reason for this conversion is day count convention: actual/360
but if you'll forgive my semantic error (delete 'compound'), then the top of 45 is simply
(if we nix the use of simple and, worse, market)
converting one semi-annual or bond-equivalent return...
(notice the precision of these terms)
...into another semi-annual or bond-equivalent return
and only *merely* translating for day count convention;
e.g., as Tuckman's 4.11
5% semi annual return * 360/362 = 4.9724% semiannual return
David
I got that from Tuckman 4.11 - the AIM refers to Tuckman 4.11
(but it's 181/360, right?)
I think the phrase there "simple compound rate" is an error. Technically, i think it's an error b/c it's an oxymoron. Simple implies no compounding. Apologies.
Should just be "simple rate"
where simple rate = [1/2 of his semi annual rate or his r] * 360/181
the reason for this conversion is day count convention: actual/360
but if you'll forgive my semantic error (delete 'compound'), then the top of 45 is simply
(if we nix the use of simple and, worse, market)
converting one semi-annual or bond-equivalent return...
(notice the precision of these terms)
...into another semi-annual or bond-equivalent return
and only *merely* translating for day count convention;
e.g., as Tuckman's 4.11
5% semi annual return * 360/362 = 4.9724% semiannual return
David
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