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

Ac/dc conversion, Circuit that is able to convert an AC voltage signal into...

Circuit that is able to convert an AC voltage signal into DC voltage signal

Trusses, determine forces in each member of equilqteral truss

determine forces in each member of equilqteral truss

Grain ethanol plant design, Can you help me design a grain ethanol plant as...

Can you help me design a grain ethanol plant as a design project? I need help with mass and energy balances Key equipment design ie distillation column, heat exchanger, storage t

Mos ic-s, MOS IC-S: Not all IC's are constructed using bipolar componen...

MOS IC-S: Not all IC's are constructed using bipolar components, IC's are often designed to utilize either bipolar transistors or "Field-Effect transistors" (FETS).  The Field

Microbiology, Explain the following observations: cells of Escherichia coli...

Explain the following observations: cells of Escherichia coli fermenting glucose grow faster when NO3 - is supplied to the culture and then grow even faster when the culture is hig

Use of multicylinder engine, USE OF MULTICYLINDER ENGINE If, in a multi...

USE OF MULTICYLINDER ENGINE If, in a multi cylinder engine, power strokes are staggered, the limitation of flywheel can be overcome to a large extent. Torque diagram for 2 cyli

Communication and scholarship, Illustrate the importance of communication i...

Illustrate the importance of communication in a retail business organisation?25 marks

Passive clearance control system - aircraft engine, Passive clearance contr...

Passive clearance control system : Compressor discharge air and HP compressor air provide cooling airflow to protect the turbine casing against rapid temperature changes. Th

Instrumentation and control Engee., all the types of inductor which are kno...

all the types of inductor which are known?????

Which type of financing is appropriate to each firm?, .which type of financ...

.which type of financing is appropriate to each firm?

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