D = 10 ## duration (in years)
r_borrow = 0.07 ## cost to borrow money
delta_r = -0.005
r = 0.06 ##
c = 0.085 ## coupon rate

## Year 1:
##
invested = 7.5
borrowed = 12.5
P = invested + borrowed
P0 = P
delta_P_1 = -D*P*delta_r
delta_P_2 = P*c
delta_P_3 = -r_borrow * borrowed
delta_P = delta_P_1 + delta_P_2 + delta_P_3
RoR = delta_P / invested
y_1_results = c(1992, delta_P_1, delta_P_2, delta_P_3, delta_P, RoR)
print(y_1_results)

r = r + delta_r
c = c + delta_r
r_borrow = r_borrow + delta_r


## Year 2:
##
invested = invested + delta_P
P = invested + borrowed
delta_P_1 = -D*P*delta_r
delta_P_2 = P * c
delta_P_3 = -r_borrow * borrowed
delta_P = delta_P_1 + delta_P_2 + delta_P_3
RoR = delta_P / invested
y_2_results = c(1993, delta_P_1, delta_P_2, delta_P_3, delta_P, RoR)
print(y_2_results)

r = r + delta_r
c = c + delta_r
r_borrow = r_borrow + delta_r


## Year 3:
##
invested = invested + delta_P
P = invested + borrowed
delta_P_1 = -D*P*delta_r
delta_P_2 = P*c
delta_P_3 = -r_borrow * borrowed
delta_P = delta_P_1 + delta_P_2 + delta_P_3
RoR = delta_P / invested
y_3_results = c(1994, delta_P_1, delta_P_2, delta_P_3, delta_P, RoR)
print(y_3_results)

r = r + delta_r
c = c + delta_r
r_borrow = r_borrow + delta_r


## Year 4:
##
invested = invested + delta_P
P = invested + borrowed
delta_P_1 = -D*P*delta_r
delta_P_2 = P * c
delta_P_3 = -r_borrow * borrowed
delta_P = delta_P_1 + delta_P_2 + delta_P_3
RoR = delta_P / invested
y_4_results = c(1995, delta_P_1, delta_P_2, delta_P_3, delta_P, RoR)
print(y_4_results)


## from this point onwards the rates start going back up:
##
delta_r = +0.02
r = r + delta_r
c = c + delta_r
r_borrow = r_borrow + delta_r


## Year 5:
##
invested = invested + delta_P
P = invested + borrowed
delta_P_1 = -D*P*delta_r
delta_P_2 = P * c
delta_P_3 = -r_borrow * borrowed
delta_P = delta_P_1 + delta_P_2 + delta_P_3
RoR = delta_P / invested
y_5_results = c(1996, delta_P_1, delta_P_2, delta_P_3, delta_P, RoR)
print(y_5_results)


r = r + delta_r
c = c + delta_r
r_borrow = r_borrow + delta_r


## Year 6:
##
invested = invested + delta_P
P = invested + borrowed
delta_P_1 = -D*P*delta_r
delta_P_2 = P * c
delta_P_3 = -r_borrow * borrowed
delta_P = delta_P_1 + delta_P_2 + delta_P_3
RoR = delta_P / invested
y_6_results = c(1997, delta_P_1, delta_P_2, delta_P_3, delta_P, RoR)

r = r + delta_r
c = c + delta_r
r_borrow = r_borrow + delta_r


DF = data.frame( rbind( y_1_results, y_2_results, y_3_results, y_4_results, y_5_results, y_6_results ))
colnames(DF) = c('year', 'deltaP1', 'deltaP2', 'deltaP3', 'deltaP', 'RoR')
rownames(DF) = NULL
print(DF)

## At the start of year 7:
##
invested = invested + delta_P
P = invested + borrowed
print(sprintf('Start of year 7 porfolio value= %f; net gain= %f', P, P-P0))