Homework Problem - Nice examples

Homework Problem - Nice examples - r* 2.75% 3-Year Yield...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Present Value of Investment Interest rate 9% Year 0 1 2 3 4 5 6 Ann Pmt $0 $150 $175 $200 $250 $300 $500 Lump Sum Total CFs $0 $150 $175 $200 $250 $300 $500 NPV $1,109.56 =NPV(B17,C20:H20) Future Value of Investment FV = =FV(B18,H20,,B25) $1,860.85 =1109.56(1.68) 1109.56(1+0.09) 6
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
$137.61 Year 1 =150/1.09 $147.29 Year 2 $154.44 Year 3 $177.11 Year 4 $194.98 Year 5 $298.13 Year 6 $1,109.56 =175/(1.09) 2 = 175/1.19 =200/(1.09) 3 = 200/1.30 =250/(1.09) 4 = 250/1.41 =300/(1.09) 5 = 300/1.54 =500/(1.09) 6 = 500/1.68
Background image of page 2
IP1 2.00% IP2 3.20% IP3 (and up) 3.60%
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: r* 2.75% 3-Year Yield 6.25% 5-Year Yield 6.80% 3-Year Bond IP3 = (IP1 + IP2 + IP3)/3 2.93% (2% + 3.2% + 3.6%)/3 Yield = r* + IP + MRP 6.25% = 2.75% + 2.93% + MRP3 0.57% (6.25% - 2.75% - 2.93%) = MRP3 5-Year Bond IP5= (IP1 + IP2 + IP3 + IP4 + IP5)/5 3.20% (2% + 3.2% + 3.6% + 3.6% + 3.6%)/5 Yield = r* +IP +MRP 6.8% = 2.75% +3.20% + MRP5 0.85% (6.8% - 2.75% - 3.20%) = MRP5 (MRP5 - MRP3) 0.28% (0.85% - 0.57%)...
View Full Document

Page1 / 3

Homework Problem - Nice examples - r* 2.75% 3-Year Yield...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online