# Essay on Finance Cash Flow

3041 Words Nov 27th, 2013 13 Pages
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
.11 | 500000.00 | 499726.89 | 2 | 4023.11 | 3747.95 | 275.16 | 499726.89 | 499451.73 | 3 | 4023.11 | 3745.89 | 277.22 | 499451.73 | 499174.51 | 4 | 4023.11 | 3743.81 | 279.30 | 499174.51 | 498895.21 | 5 | 4023.11 | 3741.71 | 281.40 | 498895.21 | 498613.81 | 6 | 4023.11 | 3739.60 | 283.51 | 498613.81 | 498330.31 | 7 | 4023.11 | 3737.48 | 285.63 | 498330.31 | 498044.67 | 8 | 4023.11 | 3735.34 | 287.77 | 498044.67 | 497756.90 | 9 | 4023.11 | 3733.18 | 289.93 | 497756.90 | 497466.97 | 10 | 4023.11 | 3731.00 | 292.11 | 497466.97 | 497174.86 | 11 | 4023.11 | 3728.81 | 294.30 | 497174.86 | 496880.56 | 12 | 4023.11 | 3726.60 | 296.51 | 496880.56 | 496584.05 | 13 | 4023.11 | 3724.38 | 298.73 | 496584.05 | 496285.32 | 14 | 4023.11 | 3722.14 | 300.97 | 496285.32 | 495984.35 | 15 | 4023.11 | 3719.88 | 303.23 | 495984.35 | 495681.13 | 16 | 4023.11 | 3717.61 | 305.50 | 495681.13 | 495375.62 | 17 | 4023.11 | 3715.32 | 307.79 | 495375.62 | 495067.83 | 18 | 4023.11 | 3713.01 | 310.10 | 495067.83 | 494757.73 | 19 | 4023.11 | 3710.68 | 312.43 | 494757.73 | 494445.30 | 20 | 4023.11 | 3708.34 | 314.77 | 494445.30 | 494130.53 | 21 | 4023.11 | 3705.98 | 317.13 | 494130.53 | 493813.40 | 22 | 4023.11 | 3703.60 | 319.51 | 493813.40 | 493493.89 | 23 | 4023.11 | 3701.20 | 321.91 | 493493.89 | 493171.99 | 24 | 4023.11 | 3698.79 | 324.32 | 493171.99 | 492847.67 | 25 | 4023.11 | 3696.36 | 326.75 | 492847.67 | 492520.91 | 26 | 4023.11 | 3693.91 | 329.20 |

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