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

Various stages of creep, Q. Explain various stages of creep? Ans. CREE...

Q. Explain various stages of creep? Ans. CREEP: Creep can be defined as the process by which plastic flow occurs when a constant stress or load is applied to a material for a

Traffic management, (a) Discuss the requirements, specifications and specia...

(a) Discuss the requirements, specifications and special requirements for the  design of arterial road networks and residential area street networks in a developing suburban region

Laptop, How laptop making main function plz established??

How laptop making main function plz established??

Physical chemistry, can you answer some problem from physical chemistry wit...

can you answer some problem from physical chemistry with a detailed approach why and how one should choose the steps in solving them.These are just random question that I have no c

Oil pumps - aircraft engine, OIL PUMPS The oil pumps fitted in a recirc...

OIL PUMPS The oil pumps fitted in a recirculatory system are normally gear-type or Gerotor type pumps. The pumps are usually mounted in a pack containing one pressure pump and

The pitch change mechanism , THE PITCH CHANGE MECHANISM : The cylinder...

THE PITCH CHANGE MECHANISM : The cylinder backplate . The disc shaped backplate provides a mounting for the pitch change cylinder. This backplate fits in front of the propel

Assignment #5, the date december 13, 2005. Air traffic controllers in a con...

the date december 13, 2005. Air traffic controllers in a control tower in

Thermodynamics, original temp. of plate is 25 degree c.when put in burnace ...

original temp. of plate is 25 degree c.when put in burnace its upper part is 250 c and lower is 100 and mass is 56kg.find out heat transfer

Process control, I have an assignment which I need help with

I have an assignment which I need help with

Write Your Message!

Captcha
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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd