Customer Service Chat
Get quote & make Payment
Help please, finance, Other Engineering
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?
Posted Date: 2/15/2012 7:24:50 PM | Location : United States
Ask an Expert
Help please, finance, Assignment Help, Ask Question on Help please, finance, Get Answer, Expert's Help, Help please, finance Discussions
Write discussion on Help please, finance
Your posts are moderated
Write your message here..
Transistor, Examining the circuit of an amplifier you’d find many electrica...
Examining the circuit of an amplifier you’d find many electrical components, of which all play a role only they can fulfill. Among these components, it is the transistor which pla
KK-3 system coding, how to write code for any particle shape using KK-3 sys...
how to write code for any particle shape using KK-3 system coding in grope technology
Engine torque, ENGINE TORQUE It is the force of rotating action about t...
ENGINE TORQUE It is the force of rotating action about the crankshaft axis at any given instant of time. It is given by,
Controller requirements, Controller Requirements The requirements for ...
Controller Requirements The requirements for the stability and performance of fight control systems are specified in the certi-fication requirements for U.S. civilian aircraft
Pitch control unit (pcu) operation - propellers, Pitch control unit (pcu) o...
Pitch control unit (pcu) operation: The action of the Governor bob weights, due to the varying RPM of the engine, is to raise or lower an internal piston to cover or open fluid
Moulding materials, The commonly used moulding materials for mould making...
The commonly used moulding materials for mould making can be broadly classified into the following two groups : (a) Metals : Including grey cast iron, steel and an
Electronic devices, give a criticalanalysis of a zener diodedata with suita...
give a criticalanalysis of a zener diodedata with suitable chracteristicsand applications
Credit limit, HOW WOULD YOU JUDGE THE POTENTIAL PROFIT OF BAJAJ ELECTRONICS...
HOW WOULD YOU JUDGE THE POTENTIAL PROFIT OF BAJAJ ELECTRONICS
Maintenance of aircraft under “b” conditions, Maintenance of Aircraft under...
Maintenance of Aircraft under “B” conditions: The maintenance of aircraft flying under "B" conditions must be adequate in relation to the number and duration of the flight
Power factor., how can decrease the power factor of any electric circuit
how can decrease the power factor of any electric circuit
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Terms & Conditions
Copyright by ExpertsMind IT Educational Pvt. Ltd.