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

Communications system, Communications System • Information Source - ...

Communications System • Information Source - Information may take many forms: data, image, voice, video • Transmittter - Processes information into a form suitable for

Shift registers, Shift registers A register is a number of flip-flops a...

Shift registers A register is a number of flip-flops arranged in a circuit used for storing data.  A shift register is one that is designed to move the data along the register.

Local attraction, how can we find local attraction correction?

how can we find local attraction correction?

Architectural Design and Drawing, how can I improve my G+4 apartment with r...

how can I improve my G+4 apartment with rendering with pen and ink

Housing policy and practice, how much is a 3000 words essay in the above ti...

how much is a 3000 words essay in the above title

Acoustic linings in aircraft engine, Acoustic linings in Aircraft engine: ...

Acoustic linings in Aircraft engine: One method of suppressing the noise from the fan stage of a high by-pass ratio engine is to incorporate a noise absorbent liner around the

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

Parmpreet, Hi, i want to get a quote for my communication networks assignme...

Hi, i want to get a quote for my communication networks assignment

Variables and quantifiers in first-order logic, Variables and Quantifiers i...

Variables and Quantifiers in First-Order Logic - Artificial intelligence: Now suppose that we wanted to say that there is a meal at the Red Lion which costs only three pounds.

Aviation legislation - maximum take-off mass, Aviation legislation - MAXIMU...

Aviation legislation - MAXIMUM TAKE-OFF MASS: Aircraft companies intending to manufacture a new design must have approval under Chapter A8-1 of BCAR or JAR-21 (Certification Pr

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