FRM-Spot rate
Finance Junkie
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Joined: Mon Feb 04, 2013 3:35 pm

FRM-Spot rate

Postby » Sat Aug 31, 2013 11:59 am

Spot rate(1.5)=[(1/Discount factor^(1/3))-1]

Can anyone explain this formula concept. i want to know why is it ^(1/3) and not 3

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Posts: 16
Joined: Tue Sep 03, 2013 1:16 pm

FRM-Spot rate

Postby vighnesh.mehta » Wed Sep 04, 2013 2:45 am

Try to solve the equation using the simple formula of calculating the future value assuming the discount factor as the present value and $1, the future value to be received after 1.5 years.
The formula stated as FV= PV(1+R/100)^N.
Still you have doubt you can raise it here.

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