Calculate the inflation-adjusted principal at the beginning

Assignment Help Accounting Basics
Reference no: EM1394097

Consider an investor who, on January 1, 2011, purchases a TIPS bond with an original principal of $100,000, an 8% annual (or 4% semiannual) coupon rate, and 10 years to maturity.

a. If the semiannual inflation rate during the first six months is 0.3%, calculate the principal amount used to determine the first coupon payment and the first coupon payment (paid on June 30, 2011).

b. From your answer to part b, calculate the inflation-adjusted principal at the beginning of the second six months.

c. Suppose that the semiannual inflation rate for the second six-month period is 1%. Calculate the inflation-adjusted principal at the end of the second six months (on December 31, 2011), and the coupon payment to the investor for the second six-month period is the inflation-adjusted principal on this coupon payment date.

Reference no: EM1394097

Questions Cloud

What is credited with gains in industrial productivity : Explain how typical the attitudes which Sheehy reports appear to be in work environments you have experienced.
Rationale behind estimatation : Using your own experience, estimate the probability the local weather forecast is correct. Explain the rationale behind your estimate.
Valuation and financial intermediation : What role does a financial department play in valuing business opportunities and what are some of the key financial concepts that valuation work must consider?
How store supply chain and operations support talbolts : What went wrong with Talbolts in 1997? Was it faulty strategy or execution? Who is Talbolts customer? How does store supply chain and operations support this?
Calculate the inflation-adjusted principal at the beginning : Calculate the inflation-adjusted principal at the end of the second six months (on December 31, 2011), and the coupon payment to the investor for the second six-month period is the inflation-adjusted principal
Normally distributed random variables : In other words, both variables have the same mean but different standard deviations. Draw rough sketches of the two normal curves on the same graph.
Which disney now has parks in hong kong : Now which Disney now has parks in Hong Kong also Shanghai? Suppose, you are a consultant hired to provide Disney advice on the issue of where also when to go next. Select the one you think will be the best new location for "Disneyland X." Explain ..
Exam counts for the final grade : Bob gets tests grades of 86, 92, and 60 He gets an 90 on his final exam. Find the weighted mean if each tests counts for 20%, and the final exam counts for 40% of the final grade.
How to maintain a constant workforce size : Maintain a constant workforce size however, vary hours worked to correspond to predicted demand requirements.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Determining audition and sampling

What are some ways that auditors can be sure that the sample sizes will be fair enough to provide a look at internal controls, yet comprehensive enough to detect any irregularities? Is there a way?

  Entries for reacquisition and resale of stock

On August 10, Jameson Corporation reacquired 8,000 shares of its $100 par value common stock at $134. The stock was originally issued at $110. The shares were resold on November 21 at $145. Provide the entries required to record the reacquisition ..

  High quality of earnings

Your posts are very good and state that management should focus on the success of the business rather than managing income to their benefit. This gets into ethics, where if you keep doing the right thing you will reap the benefits with bonus's and..

  Journal entry of purchase of long-term bonds

Karr Company purchased bonds with a face amount of $400,000 between interest payment dates. Karr purchased the bonds at 102, paid brokerage costs of $6,000, and paid accrued interest for three months of $10,000.

  Explain in general terms the accounting treatment

Accounting Homework:   Explain in general terms the accounting treatment to changes in terms of existing loans.  What should be the accounting treatment of the modification to Blueberry's note?

  Performance evaluation-residual income

Williamson Group operates a chain of bookstores. A recent business expansion plan resulted in the opening of more than 25 new stores. The Upland store has one more feature that the Stowe store does not have-a small coffe shop.

  Margin of safety problems

Strong Wood Company is a distributor of patio furniture. Data concerning the next month's budget appear below. What is the company's margin of safety? What is the company's margin of safety as a percentage of sales?

  Determining variable and absorption costs

Assume that the company uses variable costing, compute the unit cost for one knife set? Assuming that the company uses absorption costing, compute the unit cost for one knife set.

  Market value of firm common equity

BunaBuna has been growing at a 15 percent annual rate and is expected to continue to do so for 3 more years. At that time, growth is expected to slow to a constant 4 percent rate.

  Alternative ways of recording sales tax

In providing accounting services to small businesses, you encounter the following situations pertaining to cash sales. Prepare the entries to record the sales transactions and related taxes for (a) Grainger Company and (b) Darby Company.

  Corporation tax-warner corporation

The Warner Corporation has gross income of $560,000. It has business Expenses of $325,000, a capital loss of $20,000 and $2,500 of interest income on temporary investments. What is the corporation's taxable income?

  Ownership of brown shares

How many shares does Bob own in Brown Corporation assuming the same facts as in a., above, augmented by BZ's ownership of Brown shares?

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd