1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Snowcat [4.5K]
3 years ago
12

Consider a newly issued TIPS bond with a 3-year maturity, par value of $1,000, and coupon rate of 4.00%. Assume annual coupon pa

yments.
Time Inflation in
Year Just Ended Par Value Coupon Payment + Principal Repayment = Total Payment
0 $ 1,000.00
1 2.0% $ 1,020.00 $ 40.80 0 $ 40.80
2 1.0 % $ 1,030.20 $ 41.21 0 $ 41.21
3 3.0 % $ 1,061.11 $ 42.44 $ 1,061.11 $ 1,103.55
What is the nominal rate of return on the TIPS bond in the first year?
a. 3.00%
b. 4.08%
c. 6.08%
d. 6.00%
Business
1 answer:
Ray Of Light [21]3 years ago
8 0

Answer: c. 6.08%

Explanation:

The return for the first year is given as;

= Coupon payment / Par Value

= 40.80/ 1,000

= 4.08%

TIPS are inflation protected securities so this return is the real return. Nominal return is;

= Real return + inflation

= 4.08% + 2.0%

= 6.08%

You might be interested in
To create a portfolio with duration of 4 years using a 5 year zero-coupon bond and a 3 year 8% annual coupon bond with a yield t
vovikov84 [41]

Answer:

One would have to invest 55%

Duration of 3-year bond is 2.78

Then 5wZ + 2.78(1 - wZ) = 4

2.22wZ = 1.22

wZ = .5495

Explanation:

To properly understand the concept behind the above calculation, let us define some basic concept:

Portfolio:  This can be refereed to as a phrase in finance. It refers to the collection on investment that is being held by an investment company, a financial institution such as a bank ,persons or an individual.

Zero coupon bond: A zero-coupon bond is a bond where the nominal or return on investment (ROI)  value is repaid at the time of maturity. This definition usually reflects a positive time value of money.

We should also recall that the formula for zero coupon bond as:

price = M / (1 + i)^n

where: M = maturity value

i = required interest yield divided by 2

Applying this formula, we were able to arrive at the investment percentage.

5 0
3 years ago
Oil Products Company purchases an oil tanker depot on January 1, 2017, at a cost of $600,000. Oil Products expects to operate th
anzhelika [568]

Answer:

The Journal entries are as follows:

(i) On January 1, 2017

Plant Assets A/c Dr. $600,000

      To cash                                 $600,000

[To record the depot]

(ii) On January 1, 2017

Plant Assets A/c Dr. $41,879

       To To Asset retirement obligation $41,879

[To record the Asset retirement obligation]

Missing information: Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2017, is $41,879.

4 0
3 years ago
Eric and Deborah are partners at a law firm. They are trying to determine which of them has a comparative advantage in typing th
Sergio [31]

Answer:

Eric's opportunity cost of typing pages is <u>$25</u> per page.

Based on all of these facts, <u>Deborah</u> has a comparative advantage in typing pages.

Explanation:

Eric's opportunity cost of typing is $500 / 20 pages = $25 per page.

Since's Deborah's opportunity cost of typing pages is 20% less than Eric's, then she has a comparative advantage in typing pages.

The person, business or country with the lowest opportunity cost has the comparative advantage in producing that good.

6 0
3 years ago
Which is not a common product marketing techniques?
KatRina [158]

The four common product marketinf techniques are Product, Placement, Promotion, and Price. they are referred to as four elements of marketing. in this case, preparation is not included in the group. Preparation is not a marketing technique as this is a necessity for all businesses. 
6 0
3 years ago
Kamal, after completing his studies wanted to start his own business. However, his father Mr.Kishanlal discouraged him saying th
Maksim231197 [3]

Answer:

No, Kamal's father, Mr.Kishanlal is not justified in his point of view because although it is true that money is needed to start a new business but money is not that much necessary as many other things. To start a new business and make it a success, passion, new idea and determination is much needed. If you are passionate to start something new and provide people value then it will be very easy to become successful. You should have a new idea to start a business. You should provide people with ease with the help of your new idea and new product or service. People will definitely but your products and services if it is something of value. You should have an urge to be determinant. There are many entrepreneurs, who have not much money when they started a business, but with their passion and handwork they became successful i,e, Jeff Bozos, Bill Gates, Steve Jobs etc.

7 0
3 years ago
Other questions:
  • What is the difference between accounting profits and economic profits? which of the two concepts is more appropriate for explai
    12·1 answer
  • Taylor wants to create a budget to track her expenses and identify ways she can reduce spending. What tools could she use?
    12·2 answers
  • Going directly to a car dealer for a loan keep things simple is a.....
    8·1 answer
  • Managers in a home improvement company have been having problems with employees starting cliques. To develop more of a team cult
    8·1 answer
  • On december 31, slugger batting cages company decides to trade in one of its batting cages for another one that has a cost of $5
    13·2 answers
  • Daryl Kirby opened Squid Realty Co. on January 1, 2015. At the end of the first year, the business needed additional capital. On
    11·1 answer
  • he following selected account balances appeared on the financial statements of Sanchez Company: Accounts Receivable, January 1 $
    10·1 answer
  • g The budgeted production of​ Capricorn, Inc. is 15 comma 000 units per month. Each unit requires 30 minutes of direct labor to
    8·1 answer
  • Treasury bonds paying an 8% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have t
    5·1 answer
  • What's the benefits of any Financial investments company ?
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!