# term deposit formula for PV

can someone plz help me with this: i have a term deposit. the investor deposits \$1000 on Mar 1, 2007, coupon rate is 4.2. on the maturity date one year later (Mar 1, 2008), he receives back his principal plus interest. i have a tool that calculates the present value of this investment, valued on March 1, 2007. I want to know what the formula is to do this. The following are inputs: Balance: \$1000 Coupon: 4.2% Issue date, maturity date The yield curve as of March 1, 2007 (this includes the govt rates and the spread) thanks!

i dont understand how the yield curve comes into the equation

sorry guys plz ignore. there seems to be another input taht affects the PV and it is the cashout rate (percentage of balance redeemed before maturity). but i thought in this product u cant redeem ebfore maturity, so ill have to look into this.

ok guys heres my question, plz ignore everything ebfore this. i have a GIC, which is a 1 year term deposit. so the balance is \$1000, and the coupon is 4.2%. issue date is march 1, 2007 and maturity date is march 1, 2008. so theres just one payment at maturity whwere the investor receives 1000 + 42 interest = 1042. so the input is: balance = 1000, coupon = 4.2%, issue date, maturity date, valuation date = march 1 2007, and yield curve on March 1, 2007(valuation date). the only two inputs in the yield curve that seem to be effecting my pv are the rate for 1 year maturity adn the rate for 1.5 years maturity. the ones before 1 year and after 1.5 year dont seem to chagne the output. so 1 years, the rate is 5.107% and for 1.5 years its 5.637% the calculator gives me the following output to value this investment: PV = 991.25 Price, = 99.1245 IRR = 5.046% and the following cash flows Date Term (Years) Interest Principal Total 03/01/2008 1.00205339 42.00 1,000.00 1,042.00 can someone plz explain waht formulas are used to get the pv here. i just want to be able to calculate this on my own and get the same result. thanks!

Ignoring the fact that your deposit is just over one year in term… PV = Maturity Value x 1/(1+ 1-yr rate x Term of investment / 365) PV = 1042 x 1/(1 + (.05107 x 366/365)) PV = 991.24 To get the precise figure, you’d need to replace the one year rate above with an interpolated rate (using the 1 and 1.5 year terms on your yield curve).

thanks!