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

Post graduation, i am doing be in mechanical engg in india. so can i do my ...

i am doing be in mechanical engg in india. so can i do my masters in geoophysic ?

Architectural graphics, How to draw schiography in a perspective view of an...

How to draw schiography in a perspective view of an object

Avionic systems design- stability derivatives, The idea of stability deriva...

The idea of stability derivatives is to approximate the general functional relationship between any force ormoment variable and the dynamic or control variables as a Taylor series

Crude oil assy, what is the importance of cetane number in crude oil assy?

what is the importance of cetane number in crude oil assy?

Damage limits and repair in cold section inspection , Damage Limits and Rep...

Damage Limits and Repair Minor damage to compressor and fan blades may be repaired provided the damage is within the allowable limits established by the manufacturer in the AMM

Construction and working of electron microscope, Electron Microscope Th...

Electron Microscope The development of the electron microscope was based on theoretical work done by Louis De Broglie, who found that wavelength is inversely proportional to mo

Step growth polymerization, Consider 1:1 stoichiometric polymerisation of 1...

Consider 1:1 stoichiometric polymerisation of 1,4-diaminobutane with sebacoyl chloride. (a) Write down a balanced chemical equation for the polymerization (b) Name the polymer fo

Write a program to find the area under the curve y =, #questiWrite a progra...

#questiWrite a program to find the area under the curve y = f(x) between x = a and x = b, integrate y = f(x) between the limits of a and b. The area under a curve between two point

Blow hole and pin hole porosity, Difference between   Blow hole and pin hol...

Difference between   Blow hole and pin hole porosity          Blow hole : They appear as cavities in a casting. When they are visible on the upper surface of the castings, th

Zeroth law of thermodymanics, Explain with the aid of sketch of zeroth law ...

Explain with the aid of sketch of zeroth law of thermodynamics

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