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

Biology, Any Biology Modeling software?

Any Biology Modeling software?

Roof bolt support performance, A certain coal mine has weak layer comprisin...

A certain coal mine has weak layer comprising of 10cm, 11cm, 9cm, 12cm, 15cm , and 19cm of inter laminated shales and mudstone. Design a full column resin bolt support system if th

Power factor., how can decrease the power factor of any electric circuit

how can decrease the power factor of any electric circuit

8051, Architecture of 8051

Architecture of 8051

Digit, Design the counters for the digital clock Minimum 100 words accepted...

Design the counters for the digital clock Minimum 100 words accepted#

Water traetment, what are the different phosphates used in water treatment?...

what are the different phosphates used in water treatment?

Engine vibration indication, Engine Vibration Indication The engine vib...

Engine Vibration Indication The engine vibration monitoring (EVM) system shows the out of balance force for the N1 and N2 shaft. High engine vibration shows engine damage or

Grid generator, Grid Generator The grid generator of FP sets up a compu...

Grid Generator The grid generator of FP sets up a computing grid in a transform space that consists of the interior of a unit length circular cylinder of unit radius, and compu

Surveying, Write short notes on the overcoming the following obstucal with ...

Write short notes on the overcoming the following obstucal with good leblel diagram 1 RIVER 2.BUILDING 3.DAM

Water chemistry, distinguish between priming and foaming

distinguish between priming and foaming

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