Question

		Date of lookup data:	March 1st, 2019
Money Market Rates, etc.				U.S. Treasurys [†,1]
Security		Yield		T-Bill, Note, Bond	Yield
1-month Euro LIBOR		-0.41%		1-month T-Bill	2.44%
1-month U.S T-Bill		2.39%		2-month T-Bill	2.46%
1-month LIBOR		2.48%		3-month T-Bill	2.44%
Federal Funds		2.40%		6-month T-Bill	2.52%
Federal Reserve Discount Rate		1.00%		1-Year T-Bill	2.55%
Negotiable CDs		2.69%		2-Year T-Note	2.55%
U.S Commercial Paper		2.40%		3-Year T-Note	2.54%
Overnight Repos		2.40%		5-Year T-Note	2.56%
Banker's Acceptance		6.62%		7-Year T-Note	2.67%
Eurodollar Deposits		2.84%		10-Year T-Note	2.76%
Euro CP		data …		20-Year T-Bond	2.97%
Eurozone Prime Rate		0.00%		30-Year T-Bond	3.13%
U.S. Prime Rate		5.50%

from previous question, copy over the following U.S Treasury Yields. Specify the maturity in months

Using the looked-up U.S Treasury Yields from the previous question, plot its Yield Curve. Hint: you might want to use Excel's Chart Wizard, using the XY (scatter plot) option. which is a result of Treasury prices transacted in the market. These prices are "bootstrapped" to derive its. Spot Rates z1, z2, z10, …, z30.

Maturity(months)

1

2

3

6

12

24

36

60

84

120

240

360

Yield

fill in data

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z1mth

z2mth

z3mth

z6mth

z1

z2

z3

z5

z7

z10

z20

z30

Answer 1

solution :

given that Rundle Freight Company owns a truck that cost $33,000.

also given that Currently, the truck’s book value is $27,000, and its expected remaining useful life is five years

mentioned in gi ven indormation that

Rundle has the opportunity to purchase for $28,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $7,000 per year more than fuel cost for the new truck.

some other given information The old truck is paid for but, in spite of being in good condition, can be sold for only $16,000.

Calculating the total relevant costs:

	retaining truck	replacing truck
cost of the new truck	$-	$28000
additional fuel cost (5*7000)	$35000	$-
oppurtunity cost	$16000	$-
total cost	$51000	$28000

final decision of retaining old truck :

the purchase cost of ol;d truck and book value are irrelevant

they are sunk cost

therefore they should not be considered

the comparision cost of replacing and retaining truck are given above

from the above table

the company should replace the old truck as it would cost $28000 in replacement as against the cost of reraining truck of $51000