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Finance[NetPresentValue] - return the net present value of future cash flows

Calling Sequence

NetPresentValue(instrument)

NetPresentValue(cashflows, discountrate, opts)

Parameters

instrument

-

cash flow swap or an interest rate swap; financial instrument

cashflows

-

data structure created using the SimpleCashFlow constructor or a list of such data structures; cash flows

discountrate

-

non-negative constant or a yield term structure; discount rate

opts

-

equations of the form option = value where option is one of referencedate or daycounter; specify options for the NetPresentValue command

Description

• 

The NetPresentValue(instrument) calling sequence returns the net present value of the given instrument. The parameter instrument in this case can be either a cash flow swap or an interest rate swap. For bonds the net present value is the same as the dirty price (see DirtyPrice).

• 

The NetPresentValue(cashflows, discountrate, opts) calling sequence returns the net present value for the future cash flows discounted with respect to the given discount rate.

Examples

withFinance:

First set the global evaluation date.

SetEvaluationDateJanuary 01, 2005:

EvaluationDate

January 1, 2005

(1)

Calculate the net present value of 100 dollars to be paid on January 2, 2007.

paymentdate:=Jan-02-2007

paymentdate:=Jan-02-2007

(2)

cashflow1:=SimpleCashFlow100,paymentdate

cashflow1:=100. on January 2, 2007

(3)

NetPresentValuecashflow1,0.03

94.16871315

(4)

100DiscountFactor0.03,paymentdate

94.16871315

(5)

NetPresentValuecashflow1,0.03,referencedate=Jan-01-2004

91.38560707

(6)

100DiscountFactor0.03,paymentdate,referencedate=Jan-01-2004

91.38560707

(7)

Here is another example.

nominalamt:=100

nominalamt:=100

(8)

rate:=0.05

rate:=0.05

(9)

paymentdate:=Jan-01-2015

paymentdate:=Jan-01-2015

(10)

startdate:=Jan-01-2006

startdate:=Jan-01-2006

(11)

enddate:=Jan-01-2010

enddate:=Jan-01-2010

(12)

coupon:=FixedRateCouponnominalamt,rate,startdate,enddate,paymentdate

coupon:=20. on January 1, 2015

(13)

Compute the value of this cash flow on January 1, 2005.

NetPresentValuecoupon,0.03

14.81636441

(14)

Here is another way to compute this. First, compute the accrued interest.

accrued:=nominalamtCompoundFactorrate,enddate,referencedate=startdate,compounding='Simple'nominalamt

accrued:=20.0000000

(15)

This is the value to be received on January 1, 2010. Discount this value using the discount rate.

accruedDiscountFactor0.03,paymentdate

14.81636441

(16)

See Also

Finance[CompoundFactor], Finance[DiscountFactor], Finance[FixedRateCoupon], Finance[InArrearIndexedCoupon], Finance[ParCoupon], Finance[SimpleCashFlow], Finance[UpFrontIndexedCoupon], Finance[ZeroCurve]


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