User Account

All Pages

Help please, finance, Other Engineering

Assignment Help:
Judy Johnson is choosing between investing in two Treasury securities
that mature in five years and have par values of $1,000. One is
a Treasury note paying an annual coupon of 5.06 percent. The other
is a TIPS which pays 3 percent interest annually.

a.If inflation remains constant at 2 percent annually over the
next five years, what will be Judy’s annual interest income
from the TIPS bond? From the Treasury note?
If inflation over the next five years is 2%, the principle value rises to $1000 plus 2% or $1,020. The effective interest, what we are effectively earning on the tips with the inflation, is 5.06% - 2% = 3.06%. Judy’s annual interest income from the TIPS bond = 1000 x 0.02 x 5 = $100
Judy''s annual interest income from the TIPS bond
First year: value: 1020 interest 30.6
Second year: value: 1040.4 interest: 31.21
Third year: value: 1061.21 interest: 31.84
Fourth year value: 1082.43 interest: 32.47
Fifth year value: 1104.08 interest: 33.12

Judy''s annual interest income from the Treasury note
First year: value: 1020 interest 51.61
Second year: value: 1040.4 interest: 52.64
Third year: value: 1061.21 interest: 53.70
Fourth year value: 1082.43 interest: 54.77
Fifth year value: 1104.08 interest: 55.87

b. How much interest will Judy receive over the five years from
the Treasury note? From the TIPS?
Interest from Treasury note: 205.76
Interest The TIPS: 333.95

c. When each bond matures, what par value will Judy receive
from the Treasury note? The TIPS? If the bond matures 3 %, then Judy should receive a value of $30.00
$.03 % x $1,000 = $30.00

d. After five years, what is Judy’s total income (interest par)
from each bond? Should she use this total as a way of deciding
which bond to purchase?

Related Discussions:- Help please, finance

Lead time, Enumerate possible impact of having inadequate system design in ...

Enumerate possible impact of having inadequate system design in the lead time and engineering cost?

Logic gate-or gate , logic gate-OR gate  Figure shows the symbol that r...

logic gate-OR gate  Figure shows the symbol that represents a 2 input OR gate together with its truth table. This gate will adopt a 1 state at its output terminal when either

Accelerated Slipstream, Does the accelerated slipstream create more lift on...

Does the accelerated slipstream create more lift on part of a wing behind the propeller of a multa-engine aircraft? If so, about how much % for an Air King b200? Also the V-22 O

Assembly buildings - common fault, Assembly buildings - fire risk assessmen...

Assembly buildings - fire risk assessment: Common faults found in assembly buildings are: Combustible items left in protected routes or bedroom corridors Locked exi

Fibre optics communications, explain the fibre optic communication system w...

explain the fibre optic communication system with block diagram

Mohammed, Hi

Hi

Analyze an organization''s competition, Briefly explain how to analyze an o...

Briefly explain how to analyze an organization''s competition Answer: In order to analyze an organization’s competition, the following aspects need to be checked and recorded in o

Mobile Communication, A car, moving in the south-east direction at a veloci...

A car, moving in the south-east direction at a velocity of 5 m/s, receives a ray of power of -120 dBm each from the north, east and west. The carrier frequency is 300 MHz. (i) Sket

#title.plane table surveying., how to conduct a plane table survey

how to conduct a plane table survey

Angle and bearing, #question.what is angle and bearing.

#question.what is angle and bearing.

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd