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

About acidityb of floure, why wehabve to determine the acidity of floure

why wehabve to determine the acidity of floure

Probabilistic analysis - fire risk assessment , Probabilistic analysis - Fi...

Probabilistic analysis - Fire risk assessment: Probabilistic analysis relies on data and data comes from experience.  The broader the experience, the larger the data source an

Nicol prism, nicol prism work

nicol prism work

Uncertainty propagation, Uncertainty propagation In order to calculate ...

Uncertainty propagation In order to calculate the error of a quantity derived from a mathematical formula which has measured variables with errors, one should use the uncertain

Local attraction, how can we find local attraction correction?

how can we find local attraction correction?

Engineering Mechanics-Statics, http://www.cramster.com/answers-apr-12/mecha...

http://www.cramster.com/answers-apr-12/mechanical-engineering/engineering-mechanics-static_2386217.aspx?rec=0

Normal spectrum, Q. What is a normal spectrum? Show that grating spectrum i...

Q. What is a normal spectrum? Show that grating spectrum is a normal spectrum. Ans. Normal spectrum and the dispersive power of grating is defined as the rate of change of a

Blending of metal powder, Q.5 Explain briefly the Blending of metal powders...

Q.5 Explain briefly the Blending of metal powders. Ans. Blending of Metal Powder:              The procedure of blending (mixing) powders is taken out for the followi

Fire fighting operations - high rise buildings, Fire fighting operations - ...

Fire fighting operations - high rise buildings: Inlets that allow the fire service to supplement to water to the sprinklers and to the fire mains are useful additions to the m

Case law on evaluatig credit requests, This case has been framed in order t...

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer of petroleum and

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