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

Bragg''s law and calculation of wavelength, Q.   Explain Bragg's law. A mon...

Q.   Explain Bragg's law. A monochromatic X-ray is incident on a crystal. By rotation the crystal, two successive reflections are obtained at angles of 10.0° and 23.0°. the inter p

Theory of solar system, Expertsmind.com brings you unique solution in ele...

Expertsmind.com brings you unique solution in electrical engineering Define terms of Galaxy Clusters, Basic Astronomical Objects, Astronomical Distance Units, Terms

Jfet operation - junction, JFET OPERATION Figure shows the operati...

JFET OPERATION Figure shows the operation of a JFET. The JUGFET has a physical structure that can be represented by the diagram shown in Figure. In Figure, if the N-Ty

Seat belt warning system, Expertsmind.com  brings you unique solution in E...

Expertsmind.com  brings you unique solution in Electrical Engineering   Seat belt warning system Seat belt warning system is developed to cut off the car’s ignit

Electrical engineering, how to get guidance of projects in electrical engin...

how to get guidance of projects in electrical engineering?

Mode ii interlaminar fracture , The Mode II fracture toughness is measured ...

The Mode II fracture toughness is measured using the ENF  Typically, the specimen length is 120 mm, the width B is 20 mm, the thickness is between 3 and 5 mm and the distance be

Basic principles - propeller, BASIC PRINCIPLES : The purpose of a prope...

BASIC PRINCIPLES : The purpose of a propeller is to convert the power developed by the engine into a useful force called 'Thrust'. This force must be equal to and opposite in

Standard cost, Standard cost of the product

Standard cost of the product

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

Solid state devices, Derive an expression for electron concentration in con...

Derive an expression for electron concentration in conduction band and hole concentration in valance band

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