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

Power system analysis, I need a project in Load impact in power flow((const...

I need a project in Load impact in power flow((constant power, constant impedance, constant current, induction motor). Report from 3 articles source and simulation in powerworld s

Flight dynamics - introduction, In the Aircraft Performance course, the air...

In the Aircraft Performance course, the aircraft was assumed to be in a steady-state (e.g. steady  cruise, climb, turn, glide), with the forces and moments balanced. The subject of

FISICA, EL DESPLAZAMEINTO DE UNA PARTICULA ESTA DADO POR S=(-2+3T)e¨-0.5t

EL DESPLAZAMEINTO DE UNA PARTICULA ESTA DADO POR S=(-2+3T)e¨-0.5t

Industrial electronics, difference between IGBT and GTO

difference between IGBT and GTO

Commercial buildings - fire protection engineering, Commercial buildings - ...

Commercial buildings - fire protection engineering: The term 'commercial buildings' refers to any buildings that are not residential buildings and that do not fall under the m

Finance.., hi, I need to do this question but I couldn''t capable to do i...

hi, I need to do this question but I couldn''t capable to do it. so can you tell me how much money I can give you to be done? How would you value the price of a Microfinance I

Java, 2. Differentiate between stream oriented and data gram oriented socke...

2. Differentiate between stream oriented and data gram oriented socket in java?

Vibration , ME 312 Project: Design for Vibration and Shock Suppression (Due...

ME 312 Project: Design for Vibration and Shock Suppression (Due Sunday 6/5/2012) Introduction To protect the electronic control module from fatigue and breakage, it is desirable

Derivative securities, Let C (K) denote a European vanilla Call option with...

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 K1 What are the no-ar

CDMA, In a CDMA system, the signal is spread over a large bandwi...

In a CDMA system, the signal is spread over a large bandwidth by multiplying the transmitted symbol by a sequence of short pulses, also called chips. The

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