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

Protected escape routes - means of escape, Protected escape routes - fire p...

Protected escape routes - fire protection engineering: Protected escape routes: Does the fire resistance fully enclose the protected routes? Do the fire doors

Tool life, hi I''m doing research in tool life of solid carbide endmills ...

hi I''m doing research in tool life of solid carbide endmills and I was looking at your formulas. I was wondering if tell me or where I can find the data required for these formu

Aircraft radio installation licence and approval, AIRCRAFT RADIO INSTALLATI...

AIRCRAFT RADIO INSTALLATION (STATION) LICENCE AND APPROVAL 1. A radio installation licence is issued by the Department of Trade and Industry Radio Communications Agency , fo

Mr Rhino, Which range will you select when measuring for 240ohms resistor?

Which range will you select when measuring for 240ohms resistor?

Aerodynamics-flow model diagram , We will need to use several different flo...

We will need to use several different flow models as we go along. It is crucial to understand the simplifications used to obtain these models because these limit the validity of th

Personal Financial Management Math College Level, How do you find initial m...

How do you find initial monthly payment for the second year after an adjustable-rate mortgage?

Engineering Economy, I need the answers of these three problems. 1. How muc...

I need the answers of these three problems. 1. How much money would be in a savings count that started with a deposit of $2,000 in year 1 with each succeeding amount increasing by

3d sketch , I am a chemical engineering foundation year. I need your help ...

I am a chemical engineering foundation year. I need your help with my homework, its 3D sketch by using Google sketchup program?? I have not use it before. Or any other 3D sketch p

Accounting rate of return method, Accounting rate of return method ARR met...

Accounting rate of return method ARR method is also known as ‘Return on Investment Method’. Here accounting information as shown in the financial statement is the basis for measu

Flight control - linear system, Representations of a linear system The ...

Representations of a linear system The linear system of Section is shown in block diagram To determine the responseof the output of the system y(t) to an input u(t) the initial

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