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My personal preference is to use OIS rate for recent years, and LIBOR when OIS isn't available. If neither is available, CB target rate can also be used.


1

I believe in the literature they use either the T-bill rate or short term bank deposit rate.


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Your answer is correct. The point is you need to match the interest rate periods with the compounding periods. So if (R/N) is the rate for a 1-month period, then "NT" must be the number of compounding months. Since you are compounding for 10.5 years, this represents 126 months (10.5 * 12). If, on the other hand, your compounding is semiannual (as is usual ...


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If your compound period is monthly, then what you have is correct.



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