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

#title.DSP, 8051 microprocessor

8051 microprocessor

Naked short selling, are retail investors or traders permitted to naked sho...

are retail investors or traders permitted to naked short a stock? who is permitted to naked short a stock assuming there has been no suspension of this practice and following the f

Find out the heat loss, A 3.6-cm inside diameter stainless steel pipe is be...

A 3.6-cm inside diameter stainless steel pipe is being used to convey a liquid food. The inside convective heat-transfer coefficient is 10 J/s.m2. o C. The pipe is 0.5 cm thick and

Metal cutting tool, how to design a circural form tool on drawing sheet?

how to design a circural form tool on drawing sheet?

Electromagnetic spectrum , Electromagnetic Spectrum: Visible light belo...

Electromagnetic Spectrum: Visible light belongs to a family of waves known as the electromagnetic spectrum. Other members of this family include high frequency short wavelength

Doble titration, object:THE NORMALITY OF STANDARD FAS SOLUTION(A)N/50.find ...

object:THE NORMALITY OF STANDARD FAS SOLUTION(A)N/50.find out the strenghth and normality of fas(b) using potasium permagnettetraoxide as intermidiate compound & self indicator

Power systems, WHY VOLTAGE GENERATED IN MULTIPLES OF 11

WHY VOLTAGE GENERATED IN MULTIPLES OF 11

Coil, explain coil ?

explain coil ?

Vlsi, Working of bi- CMOS invertor in vlsi

Working of bi- CMOS invertor in vlsi

Telecom engg, the project those see in the matlab project which in the voic...

the project those see in the matlab project which in the voice of different birds

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