Rate Conversions

Free SOA Exam FM (Financial Mathematics) lesson in Time Value of Money. 14 min read, ~2,148 words.

Two-step algorithm: convert any rate to first, then to the target. Works for all five rate types and every pair. Ordering: for all. Instant sanity check. Key identity:. The discount rate is always less than the interest rate. Convergence: as, both and. Nominal discount at the same quoted value gives...