Dear R Helpers
I have following data -
cash_flow = c(7, 7, 107) # 107 = Principle 100 + interest of 7%
t = c(1,2,3)
and zero rate table as
rating year1 year2 year3
AAA 3.60 4.17 4.73
AA 3.65 4.22
4.78
A 3.72 4.32 4.93
BBB 4.10 4.67 5.25
For each of these ratings I need to calculate the Present Value as (say e.g.
for AAA)
PV(AAA) = 7/(1+3.60/100) + 7/(1+4.17/100)^2 + 107/(1+4.73/100)^3 which is
equal to 106.3549
Similarly when used the respective rates, PV(A) = 106.2122, PV(A) = 105.7969
and PV(BBB) = 104.8871
#########################################################
## My problem
I have tried the following R code.
zero_rate =
read.csv('zero_rate_table.csv')
zero_rate1 = zero_rate[, -1]
cash_flow = c(7, 7, 107)
t = c(1,2,3)
PV_table = cash_flow / (1+zero_rate1/100)^t
## Then using rowSums, I should get the required result. However, I am getting
following output as
> PV_table
year_1 year_2 year_3
[1,] 6.756757 6.45078 93.147342
[2,] 6.515675 94.521493 6.680664
[3,] 95.895064 6.710123 6.357680
[4,] 6.724304 6.389305 91.773536
rowSums(PV_table) gives
[1] 106.35489 107.71783 108.96287 104.88714.
Thus, the result is correct only in first case. In second case onwards, there
is a shift of final cashflow e.g. in 2nd case, pertaining to year 2, value is
94.521493 which means it includes principal of 100.
Likewise
in third case, the principal is included in the first cash-flow itself. Again
the fourth result is correct. So there is pre-shift of capital.
I am not sure whether I am making any mistake in reading the zero_rate csv file
or my formula is incorrect. Please guide.
Thanking you all in advance
Sarah
[[alternative HTML version deleted]]
______________________________________________
R-help@r-project.org mailing list
https://stat.ethz.ch/mailman/listinfo/r-help
PLEASE do read the posting guide http://www.R-project.org/posting-guide.html
and provide commented, minimal, self-contained, reproducible code.
