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Quantitative Finance Analysis - Term Paper Example
Author : gerholdcrystal
Pages 16 (4016 words)
There are certain techniques that investigate the reasons, patterns and specific behaviors of a previous financial decision whereas some techniques are designed to judge whether a future investment opportunity is worthwhile for the entity to encounter. …
It is important to note that the influence of using highly specialized quantitative techniques is on an increasing trend mainly due to its ability to provide inferential statistics. The results are inferred in a highly précised and accurate manner, which lead the quantitative analysts to sort out the different aspects attached with the behavior of a financial decision. This report highlights various kinds of scenarios in which the specialized quantitative techniques are applied in order to sort out the behavior of the financial decision taken under that scenario. Specialized techniques such as regression, correlation, NPV, IRR, yield to maturity, annuity, etc are utilized to analyze the different scenarios.
Net Present Value
This question inquires about the viability of an investment opportunity such that the opportunity requires $10,000 to be invested today. The cash inflows from this opportunity will be derived in such a way that $500 will be received after one year, $1,500 after two years and $10,000 after ten years. With reference to the particular technique of Net Present Value (NPV), the viability of this opportunity is asked whether the opportunity is attractive if interest rates are 6% and 2% respectively.