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

Semi conductor devices, mobility and conductivity

mobility and conductivity

Base case NPV analysis , How base case NPV analysis is applied in financial...

How base case NPV analysis is applied in financial risk management

Thin-skinned structures , Thin-skinned Structures  The SCB geometry can...

Thin-skinned Structures  The SCB geometry can't be used because the skins are too flexible.  Instead, a centre-notch flexure (CNF) test can be used. A hole is drilled abo

What is tact?, What is Tact? Tact is nothing but a situational score ene...

What is Tact? Tact is nothing but a situational score energy. Once I had gone to a Govt workplace for getting documentation. There I was informed to provide unwanted fee more th

Fire evacuation - railway inspections, Fire evacuation - Railway inspection...

Fire evacuation - Railway inspections: Fire evacuation signals should be given by voice messages and these must be easily understood by the occupants. The expected populati

Liquid crystal display (lcd), Liquid crystal display (lcd): Liquid Crys...

Liquid crystal display (lcd): Liquid Crystal Displays (LCD) are not actually light sources - they generate no light, merely filtering incident light, in a controlled manner.  T

Design structure matrix, what are the types of interactions in the design s...

what are the types of interactions in the design structure matrix?

Shell moulding process merits and demerits, Q. Describe shell moulding proc...

Q. Describe shell moulding process merits and demerits . Ans. Shell moulding process           Merits                                                   (i) Bett

Solvency ratios and profitability ratios, Solvency Ratios: Profitability R...

Solvency Ratios: Profitability Ratios: The profitability ratios determine the capacity of the company to generate the profits with the amount of shareholders investment. Again hig

Embedded system, do u do embedded system assignment?

do u do embedded system assignment?

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