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

Heisenberg''s uncertainty principle , According to this it is impossible to...

According to this it is impossible to specify precisely and simultaneously two physical quantities those are canonically conjugate to each other and the product of the uncertainty

Aeronautical engineering, what is rigidity modulus?mention its units?

what is rigidity modulus?mention its units?

Slipstream effect - propeller, Slipstream Effect. In passing through th...

Slipstream Effect. In passing through the propeller the air is accelerated and given a rotational velocity. The parts of the aircraft that are in the propeller slipstream wi

Themodynamic, 1 kg of air is allowed to expand reversibly in a cylinder beh...

1 kg of air is allowed to expand reversibly in a cylinder behind a piston in such a way that the temperature remains constant at 260 degree while the volume is doubled.The piston i

Clamping circuit, draw and explain the working of a positive clamping circu...

draw and explain the working of a positive clamping circuit?

Deconvolution, tabular method

tabular method

Removing aircraft engines, Removing Aircraft Engines: To prepare an air...

Removing Aircraft Engines: To prepare an aircraft for engine removal, check that the aircraft weight and balance will not be adversely effected when the engine is removed. Mos

Aerospace vehicle tsructures, construction of mohrs circle

construction of mohrs circle

System architecture and design, The home work is to make an model based sys...

The home work is to make an model based system architecture for an electrical car. in Enterprise Architecture with SysMl language.

Vibrating beam accelerometer, Vibrating beam accelerometer The electrod...

Vibrating beam accelerometer The electrodes are driven by a high frequency voltage (1 MHz). The displacement is measured using a phase detector from the change of capacitance b

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