In: Accounting
Find the following present values on October 31, 2020.
a) Canadian T-bill maturing for $1.2 million in 273 days based on a yield rate of 1.25%
b) $10,000 due on March 31, 2025 at a force of interest of 5%
c) $3,600 due on April 30, 2022 at a nominal rare of discount of 6%, compounded 6 times a year.
d) Payments on $10,000 made every November 1 from 2020 to 2025 at 6.5% interest.
a) | |||||||
Yield rate 1.25 for 365 days | |||||||
Yield rate is 0.935% for 273 days | |||||||
PVIF @ 0.935% is1/(1.00935)=0.99073 | |||||||
Present value of 1.2 Million note is 0.99073*1.2M=1.888Million | |||||||
b) | |||||||
PVIF @ 5% is 1/(1.05)^4.41666=0.806147 | |||||||
Present value of 10000 maturing at 31.03.2025 is 10000*0.806147=8061.47 | |||||||
PVIF=1/(1+r)^n | |||||||
r=rate | |||||||
n= number of periods | |||||||
In this case no. of years is 4 years and 5 months which comes to 4.41666 | |||||||
c) | |||||||
It is said in the question that the compounding period is 2 months( i.e, 6 times in a year) | |||||||
Period between 31.10.2020 and 30.04.2022 is 18 months. That means, n=18/2=9 | |||||||
Rate is 6% for 12 months then 1% for 2 months | |||||||
PVIF @ 1%, 9=1/(1.01)^9=0.91434 | |||||||
Present value of 3600 on 31.04.2022 is 3600*0.91434=3291.624 | |||||||
d) | |||||||
Year | PVIF @ 6.5% | Installement | DCF | ||||
0 | 1.00 | 10,000.00 | 10,000.00 | ||||
1 | 0.94 | 10,000.00 | 9,389.67 | ||||
2 | 0.88 | 10,000.00 | 8,816.59 | ||||
3 | 0.83 | 10,000.00 | 8,278.49 | ||||
4 | 0.78 | 10,000.00 | 7,773.23 | ||||
44,257.99 | |||||||
Present value of installement is 44258 |