Please show all work thank you There are two questions for a

Please show all work thank you!

There are two questions for a total of 100 points. You most support your answers with formulas explanations. Unsupported answers will result in no credit. Suppose that a risk free project will generate the following cash flows: The prices of risk free, zero coupon bonds with $1000 face value and different maturities are: Given these risk free bonds, what is the price (i.e., discounted present value) of the project?

Solution

Bond = 1000 Price Maturity Face Value PVF Cash Flows Present Value 940 1 1000 1.06383 400 376 870 2 1000 1.149425 500 435 760 3 1000 1.315789 500 380 640 4 1000 1.5625 600 384 500 5 1000 2 600 300 Discounted present value or price of the project 1875