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

Create and plot signals in ccs , I want to plot x1=4exp(t/4) x2=sin(2Pift+...

I want to plot x1=4exp(t/4) x2=sin(2Pift+pi/2) and x3=x1x2 in CcS

Identify fire hazards - fire risk assessment , Identify fire hazards: ...

Identify fire hazards: In this part, the process appears to be concentrating on issues that can lead to fire but we have to remember to also consider the presence of a fire wi

Starting worki in ccs.., 1- plot and creat x1(t)=4exp(t/5),x2(t)=Sin(2pift+...

1- plot and creat x1(t)=4exp(t/5),x2(t)=Sin(2pift+Pi/2) 2-write a c fucntion to compute convolution of n2 finite series ands plot 3-implemet an FIR filter in c in CCS

Cash Conversion Cycle, The need for working capital to run the day-to-day b...

The need for working capital to run the day-to-day business activities cannot be overemphasized. We will hardly find a business firm which does not require any amount of working ca

Validation, a web application using any technology that accepts an email ad...

a web application using any technology that accepts an email address and checks if the domain of the email address exists.

Derivatives- vertical spread, Let C (K ) denote a European vanilla Call opt...

Let C (K ) denote a European vanilla Call option with strike price K . Assume that all options are identical except for strike price, and strike prices satisfy K ??Question 1 [5 m

#title.MARKET VALUE WEIGHT OF EQUITY., AAA has 1,000,000 shares of common s...

AAA has 1,000,000 shares of common stock trading at $20.00 per share. The company''s debt consists of 2,000 $1,000 par value 10-year 7.0% annual coupon bonds with semiannual paymen

Re-heat ignition system in aircraft engine, Re-heat Ignition The atomis...

Re-heat Ignition The atomised fuel spray is fed into the re-heat jet pipe and ignited by one of three methods:- • Spark Ignition • Hot Streak Ignition • Catalytic Ignition a

End centered tetragonal lattice in the bravis list, Q.  There is no end ce...

Q.  There is no end centered tetragonal lattice in the bravis list, but there is an end centered orthorhombic lattice. Explain why this is so? Ans.  A tetragonal system is

Aircraft controls, The aerodynamic flight controls of a typical aeroplane ...

The aerodynamic flight controls of a typical aeroplane include ailerons (British: ξ ("Xi"); US: da or δa), elevator (British: η ("eta"); US de or δe), and rudder (British: ζ ("zeta

Write Your Message!

Captcha
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!

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