# work must be done on excel , show calculations and analysis

work must be done on excel , show calculations and analysis

Answered 3 days AfterFeb 02, 2024

## Answer To: work must be done on excel , show calculations and analysis

Nitish Lath answered on Feb 05 2024
Solution P6-9
Given is the following information
1 year treasury bill rate of return (r1)    5%
2 year treasury bill rate of return (r2)    5.50%
Expected return on bill next yea
r    ((1+r2^2)/ (1+r1^2)) - 1
Expected return on bill next year    ((1+0.55^2)/(1+0.05^2))-1
Expected return on bill next year    (1.113025/ 1.05) - 1
Expected return on bill next year    0.0600238095
Expected return on bill next year    6.00%
Solution P6-17
Given is the following information
Cash inflows 1-4 years    \$3,000    per year
Cash inflows 5th year    \$15,000
Return
Low-risk    4%
Average risk assets    7%
High risk assets    14%
a.    Determination of present value of asset based on risk classification
For the low-risk assets
Present value of asset
Year    Cash flows    Pvf @ 4%    Present value
1    3000    0.962    2885
2    3000    0.925    2774
3    3000    0.889    2667
4    3000    0.855    2564
5    15000    0.822    12329
Total value of asset            23219
For the average risk assets
Present value of asset
Year    Cash flows    Pvf @ 7%    Present value
1    3000    0.935    2804
2    3000    0.873    2620
3    3000    0.816    2449
4    3000    0.763    2289
5    15000    0.713    10695
Total value of asset            20856
For the high risk assets
Year    Cash flows    Pvf @ 14%    Present value
1    3000    0.877    2632
2    3000    0.769    2308
3    3000    0.675    2025
4    3000    0.592    1776
5    15000    0.519    7791
Total value of asset            16532
Requirement b
Laura should take into account the worst-case scenario, which is the greatest required rate of return (in this example, 14% for high-risk assets), to make sure she is getting a decent deal without evaluating the risk. Thus, the asset's worth determined in part a for high risk is the highest price she should be willing to pay.
Requirement c
An asset's value is significantly impacted by its level of risk. The present value of...
SOLUTION.PDF