1.
Fiveyear 6% Zero Coupon Note; maturity amount $100,000 and proceeds =$74
Period
Cash Flow
Carrying Amount
at borrowing
74,725.82
end year 1
4,483.55
4,483.55
79,209.37
end year 2
4,752.56
4,752.56
83,961.93
end year 3
5,037.72
5,037.72
88,999.65
end year 4
5,339.98
5,339.98
94,339.63
end year 5
5,660.38
100,000
(94,339.62)
0.00
NPV =
$74,725.82
2.
Mortgage note with $100,000 proceeds and 6% annual interest rate.
Payments = $100,000/(Pva, n=5, i=6%) = $100,000/4.21236 = $23,739.64
Period
Cash Flow
Carrying Amount
at borrowing
100,000.00
end year 1
6,000.00
23,739.64
(17,739.64)
82,260.36
end year 2
4,935.62
23,739.64
(18,804.02)
63,456.34
end year 3
3,807.38
23,739.64
(19,932.26)
43,524.08
end year 4
2,611.44
23,739.64
(21,128.20)
22,395.89
end year 5
1,343.75
23,739.64
(22,395.89)
0.00
PMT =
($23,739.64)
3.
5year bond with principal of $100,000; face and market interest rates of 3% per
Period
Cash Flow
Carrying Amount
at borrowing
100,000.00
6 months
3,000.00
3,000.00
0.00
100,000.00
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 Spring '08
 Staff

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