Question: Below is the spot rate from exercise 2 11. (Running PV example) A (yearly) cash flow stream is x=(-40, 10, 10, 10, 10, 10,10). The

Below is the spot rate from exercise 2 11. (Running PV

Below is the spot rate from exercise 2

example) A (yearly) cash flow stream is x=(-40, 10, 10, 10, 10,

11. (Running PV example) A (yearly) cash flow stream is x=(-40, 10, 10, 10, 10, 10,10). The spot rates are those of Exercise 2. (a) Find the current discount factors do,k and use them to determine the (net) present value of the stream. (b) Find the series of expectations dynamics short-rate discount factors, and use the running present value method to evaluate the stream. the (yearly) spot rate curve s= (5.0,5.3,5.6,5.8,6.0,6.1), E I year

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