chapter 4, zero coupon example

If you do the following on your financial calculator,

10000 [FV]

9850 [+/-] [PV]

0 [PMT]

91/365 [N]

[CPT] [I/Y]

you come up with i = 6.32%. Which is greater than our lecture notes calculation of 6.18%. Why? Because you instructed you calculator to annualize i by compounding every 91 days. The calculator solved the equation:

While the method above makes sense and is a legitimate measure of an interest rate, the method in the lecture notes, known as a bond equivalent basis, is what we use by tradition in financial markets.