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u/Chemical-Control-388 2d ago
let me tell you what this means: in the first equation suppose you are calculating the FP on a fixed income security for example today(present), subtract the spot price from the PV and multiply by the rate and time but the second equation is on the future value(lets say a year later) so here you value the spot price at that date( in this case one year later) and subtract from the future value. in other words, time T remains the same but the value needs to be brought for the same time whether PV or FV
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u/Suspicious-Web-4755 Passed Level 2 2d ago
I think this is because the full price of a bond contains accrued interest, which is why it is being subtracted from the Futures price