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I am only taking a stab at this so please do not consider what I have to say as authoritative. If we buy a two year zero coupon bond at time zero (at the above mentioned rates assumed to be annual effective rates), we would pay $\frac{100}{1.11^2}=81.16224$ and $\frac{100}{1.19^4}=49.86688$ respectively. The book value of an instrument in this context, I ...

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Interest rate is 12%, we'll assume some kind of simple day count scheme like 30/360. Cash flows and discount factors for C payer t disc.fact. rcv.cf pay.cf rcv.pv 0 1 0 -2C 0 1 .88 800 0 704 2 .7744 800 -C 619.52 3 .681472 800 -C 545.18 4 .59969536 800 -C ...

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It seems like it is related to a situation where someone can retrieve their principal payment for an object that brings in some income, such as buying a new machine that is highly productive. This income, and initial payment can be considered as an annuity, therefore it can be treated like a sinking fund problem. Although this is just one example, I hope ...

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