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# P1.T4 Valuation & Risk Models - Tuchman Ch. 2 Spot, Forward and Par Rates

#### 123Rabbit

##### New Member
Another Example: Compute semi-annual compounded rate of return for a C-Strip if a 10-year C-STRIP is quoted at 58.770, the semi-annual compounded rate of return is given by 2[(100/58.779)^1/2-1]=5.385%.

Question: I am not clear what the 100 in the formula represents? Please clarify the components in the formula. I see that 58.779 represents d(10).

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Because for a zero with s.a. compounding, Price*(1+r/2)^(2T) =Face, it follows that r = 2*[(Face/Price)^(1/2T)-1], so Face is $100 face value (which can be assumed, if the price of the ten year zero is$58.700, because it's not \$1,000).

#### rakeshranjan11

##### New Member
Hi David,
Just trying to understand, Can one find rate of return using calculator (N=20, PV = -58.77, PMT = 0.50 and FV = 0)
I was trying , but it is nowhere near the answer!!!

thanks
Rakesh

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
@rakeshranjan11 It's a zero-coupon but you are entering a payment. Please note: PV = -58.77, FV = 100, PMT = 0, N = 20 and CPT I/Y --> 2.6933 (which is a six-month rate): * 2 = 5.3866. Thanks,