Finance Cash Flow Essay

Words: 3024
Pages: 13
1. You are considering a project which generates $10,000 in 6 months and $20,000 in one year and will run you $26,000 today. You know these cash flows are exact. You also have the Treasury yield curve from the Wall Street Journal in front of you and see that the 6-month T-bill is trading at a 4% CBE discount rate and the one-year T-bond (which pays coupons in 6-months and one-year) is trading at par (100) with a yield of 6%. (Rates are CBE). Should you invest in this project?

First I solve the one-year spot rate s: 100 = 3/1.04 + 1.03/(1+s) s = 0.0606
NPV = -26,000 + 10,000/1.04 + 20,000/1.0606 = 2472.64 > 0 Invest in this project

2. You are doing some bookkeeping concerning a mortgage you took out 10 years ago, $500,000 used
688.95 | 334.16 | 491860.04 | 491525.88 | 29 | 4023.11 | 3686.44 | 336.67 | 491525.88 | 491189.21 | 30 | 4023.11 | 3683.92 | 339.19 | 491189.21 | 490850.02 | 31 | 4023.11 | 3681.38 | 341.73 | 490850.02 | 490508.29 | 32 | 4023.11 | 3678.81 | 344.30 | 490508.29 | 490163.99 | 33 | 4023.11 | 3676.23 | 346.88 | 490163.99 | 489817.11 | 34 | 4023.11 | 3673.63 | 349.48 | 489817.11 | 489467.63 | 35 | 4023.11 | 3671.01 | 352.10 | 489467.63 | 489115.53 | 36 | 4023.11 | 3668.37 | 354.74 | 489115.53 | 488760.78 | 37 | 4023.11 | 3665.71 | 357.40 | 488760.78 | 488403.38 | 38 | 4023.11 | 3663.03 | 360.08 | 488403.38 | 488043.29 | 39 | 4023.11 | 3660.32 | 362.79 | 488043.29 | 487680.51 | 40 | 4023.11 | 3657.60 | 365.51 | 487680.51 | 487315.00 | 41 | 4023.11 | 3654.86 | 368.25 | 487315.00 | 486946.75 | 42 | 4023.11 | 3652.10 | 371.01 | 486946.75 | 486575.74 | 43 | 4023.11 | 3649.32 | 373.79 | 486575.74 | 486201.95 | 44 | 4023.11 | 3646.51 | 376.60 | 486201.95 | 485825.36 | 45 | 4023.11 | 3643.69 | 379.42 | 485825.36 | 485445.94 | 46 | 4023.11 | 3640.84 | 382.27 | 485445.94 | 485063.67 | 47 | 4023.11 | 3637.98 | 385.13 | 485063.67 | 484678.54 | 48 | 4023.11 | 3635.09 | 388.02 | 484678.54 | 484290.52 | 49 | 4023.11 | 3632.18 | 390.93 | 484290.52 | 483899.59 | 50 | 4023.11 | 3629.25 | 393.86 | 483899.59 | 483505.72 | 51 | 4023.11 | 3626.29 | 396.82 | 483505.72 | 483108.91 | 52 | 4023.11 | 3623.32 | 399.79 | 483108.91 | 482709.11 | 53 | 4023.11 |

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