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

Regarding my project, i want to do project in the area wing in aircraft...p...

i want to do project in the area wing in aircraft...please give some sugestions or ideas in that

Gsm alarm system with video surveillance, i am building the above mentioned...

i am building the above mentioned system and i intend using an arduino board together with the gsm shield. my problem is i don''t know if there is a way i can control a camera by p

Engine indication systems in aircraft, Engine indication systems in Aircraf...

Engine indication systems in Aircraft: Engine indications are very important to the crew of a powered aircraft, as they indicate one of the primary parameters needed for flight

GSM BASED MOTOR ON AND OFF, in this project i want to start my motor by giv...

in this project i want to start my motor by giving a miscall so how can i decode that miscall in micro controller?

Probability distribution in matlab, I would like to ask in detail. How can ...

I would like to ask in detail. How can I attach the files?

Thermo, what is the answer for 2+2=?

what is the answer for 2+2=?

Providing alternative escape routes, Providing alternative escape routes: ...

Providing alternative escape routes: The first thing to check is if everyone can turn away from the fire and move safely away from it. For this to be the case there will

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