Contract Crediting Rate Formula
I'm stuck on backing into the gross crediting rate (1.93%). I have all the variables and the formula but I can't come up with the answer that is provided. I'm trying to find the gross crediting rate of a contract with the formula
Gross crediting rate = (MV/CV)^(1/D)*(1+AYTM)-1;
MV = market value
CV = contract value
D = duration
AYTM = annualized yield to maturity = (1+ YTM/2)^2-1
|Yield to Maturity||3.30%|
|Annualized Yield to Maturity||3.33%|
|Gross Crediting Rate||1.93%|
If I step through the formula
(MV/CV) = .96
(1/D)=.33 (.96)^.33 =.9866
(1+AYTM) = (1+.333) = 1.333
1.31 - 1= .31
I'm not getting something right where I'm coming up .31 and the solution has 1.93; any suggestions?
The other part I'm stuck on is how AYTM=3.33 when (1+.33\)^2-1=.7689
I appreciate the input!
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Thank-you! I made a rookie oversight. Greatly appreciate the help
The answer is accepted.
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