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

Aircraft fuel gauges, Aircraft fuel gauges Fuel gauge senders are capac...

Aircraft fuel gauges Fuel gauge senders are capacitor transducers that consist of concentric tubular electrodes from top to bottom of the tank. They are distributed at various

Re-heat system in aircraft engine, RE-HEAT (AFTER BURNING) Re-heat is a...

RE-HEAT (AFTER BURNING) Re-heat is a system fitted to a gas turbine engine as a means of increasing the total thrust. As much as twice the thrust can be obtained using reheat.

electronics and communication, I want to join.Please help me in completing...

I want to join.Please help me in completing the process

Circuit analysis, One thing I have always thought that experienced repair p...

One thing I have always thought that experienced repair people knew about was circuit analysis. I always imagined that when looking at schematics I would be able to figure the vol

Naval architecture and marine engineering, i have a coursework for finite e...

i have a coursework for finite element analysis of marine structure and i need help to solve it

Centrifugal flow - compressors in aircraft, Centrifugal flow - Compressors ...

Centrifugal flow - Compressors in Aircraft: The centrifugal impeller is rotated at high speed by the turbine and centrifugal action causes the air between the impeller vanes to

Various cementing materials, The various cementing materials are classified...

The various cementing materials are classified as follows. a) Argillaceous cementing materials b) Calcareous cementing materials c) Carbonaceous cementing materials Argillaceous Ma

Harriman, HARRIMAN MANUFACTURING COMPANY Harriman Manufacturing Company i...

HARRIMAN MANUFACTURING COMPANY Harriman Manufacturing Company is evaluating the purchase of a new piece of equipment. The quoted price is $50,000, and it would cost Harriman anot

Computational aerodynamics-computer laboratory, A key part of the course is...

A key part of the course is the computer laboratories which will use a package for simulating flow around aerofoils developed by Patrick Hanley . A course licence has been purchase

Jfet operation - junction, JFET OPERATION Figure shows the operati...

JFET OPERATION Figure shows the operation of a JFET. The JUGFET has a physical structure that can be represented by the diagram shown in Figure. In Figure, if the N-Ty

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