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

Electrical engineering (power system analysis), I have a project in power f...

I have a project in power flow analysis. The project topic is: Study of Load impact on power flow (constant power, constant impedance, constant current, induction motor) and use th

Fresnel''s and fraunhofer''s classes of diffraction, Q. Distinguish between...

Q. Distinguish between Fresnel's and Fraunhofer's classes of diffraction. Show that the relative intensities of successive maxima of Fraunhofer diffraction at single slit are

Explain the omni-directional and the directional antennas, Question: a)...

Question: a) An antenna is an electrical conductor or system of conductors that sends and receives radio signals. Explain the omni-directional and the directional antennas.

Barometric lag, My question is that i am working in a petrochemical plant w...

My question is that i am working in a petrochemical plant where in final stage disc ring reactor the barometric lag is chocked completely the system is under vacuum if i introduce

Market value, Calculate the market value of a firm with total assests of $1...

Calculate the market value of a firm with total assests of $105 million and $50 million of 10% perpetual debt in the capital structure. The firm''s cost of equity is 14% on the $55

Oil pumps - aircraft engine, OIL PUMPS The oil pumps fitted in a recirc...

OIL PUMPS The oil pumps fitted in a recirculatory system are normally gear-type or Gerotor type pumps. The pumps are usually mounted in a pack containing one pressure pump and

Numerical analysis, represent the numbers 387 and 25 as floating numbers an...

represent the numbers 387 and 25 as floating numbers and illustrate the calculation of 387+25 using rounding.What is the calculated sum.

Composite materials - notation of axes, Notation for Body Axes The stan...

Notation for Body Axes The standard notation for the body axis sytem for aircraft dynamics. This sectionexplains the signi?cance of the term body axis and develops the non-line

Gas turbines, factors affecting engine performance

factors affecting engine performance

Technical Paper, I need help summarizing a technical paper.

I need help summarizing a technical paper.

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