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

Crude oil assy, what is the importance of cetane number in crude oil assy?

what is the importance of cetane number in crude oil assy?

Electricity generation, Q. The Electricity generation in Florida is 224,750...

Q. The Electricity generation in Florida is 224,750GWh/y. What is the annual generation per capita? Knowing the population of Florida, the electricity generation per capita is 1

Mine Surveying.., Question 1 (100 marks) As Surveyor in charge of an underg...

Question 1 (100 marks) As Surveyor in charge of an underground mine you have been instructed to design a tunnel to join a crosscut to a haulage drive. The details of the crosscut a

Mba financial management , Which type of financing is appropriate to each f...

Which type of financing is appropriate to each firm caselet

Difference amplifier, Difference amplifier: Figure shows how two inputs...

Difference amplifier: Figure shows how two inputs can be subtracted. This circuit differs from previous types with negative feedback in that the non-inverting terminal is not

Quality assurance and accreditation, how can i link quality assurance and a...

how can i link quality assurance and accreditation with a valid applicaion of my own work?

Heat and mass transfer, Water enters a smooth thin-walled tube of 1 inch di...

Water enters a smooth thin-walled tube of 1 inch diameter at 50F and leaves at 150F. Heat is supplied to the water by condensing steam on the surface of the tube at a constant temp

Civil sit problems & its solution, two frames are not joint properly so cre...

two frames are not joint properly so create gap between two frames so material lick from this gap

Matlab, program how to estimate the inner curve using spline interpolation

program how to estimate the inner curve using spline interpolation

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

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