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Montano1993 [528]
3 years ago
14

Consider an investor who, on January 1, 2019, purchases a TIPS bond with an original principal of $116,000, an 10 percent annual

(or 5 percent semiannual) coupon rate, and 15 years to maturity. a. If the semiannual inflation rate during the first six months is 0.4 percent, calculate the principal amount used to determine the first coupon payment and the first coupon payment (paid on June 30, 2019). b. From your answer to part a, 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 1.0 percent. Calculate the inflation-adjusted principal at the end of the second six months (on December 31, 2019) and the coupon payment to the investor for the second six-month period.
Business
1 answer:
lakkis [162]3 years ago
6 0

Answer:

(a) $5,823.20

(b) $116,464.

(c) $5,881.43.

Explanation:

Given that,

Original principal = $116,000

Interest rate = 0.5% semi-annual

Time period = 10 years

Inflation rate = 0.4% semi-annual

(b) Inflation adjusted premium at the end of 6 months on June 30,2019:

= Original principal × Semi-annual inflation rate

= $116,000 × (1 + 0.004)

= $116,464.

Therefore, the inflation adjust principal at the beginning of six months is $116,464.

(a) First coupon payment paid on June 30,2019:

= inflation adjust principal × Interest rate

= $116,464 × 0.05

= $5,823.20

(c) Inflation adjusted premium at the end of 6 months on December 31,2019:

= Principal in June 30,2019 × Semi-annual inflation rate

= $116,464 × (1 + 0.01)

= $117,628.64.

Coupon payment on December 31,2019:

= Inflation adjusted premium × Interest rate

= $117,628.64 × 0.05

= $5,881.43.

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6 0
3 years ago
The accounting records of Whispering Winds Corp. show the following data. Beginning inventory 3,010 units at $6 Purchases 8,130
Sindrei [870]

Answer:

$66,700

b. LIFO = $70800

67807.81

Explanation:

LIFO means last in first out. It means that it is the last purchased inventory that is the first to be sold.

(8130 x 8) + [(9090 - 8130) x 6) = 70800

FIFO means first in, first out. It means that it is the first purchased inventory that is the first to be sold

(3010 x 6) + [(9090 - 3010) x $8] = 66,700

Average cost = [(3010 x 6) + (8130 x 8)] /

18060

48640

b 65040

5760

7 0
2 years ago
In its first 10 years a mutual fund produced an average annual return of 20.4420.44​%. Assume that money invested in this fund c
mr Goodwill [35]

Answer:

3.73 years or 4 years approx

Explanation:

The computation of the number of years taken for money invested for double is shown below:

As we know that

Amount = Principal × (1 + interest rate ÷ time period)^interest rate × time period

where,

We assume the principal be P

And, the amount is 2P

And, the other values would remain the same

So,

2P = P (1 + 0.2044 ÷ time period)^ 1  × time period

2 = (1.2044)^ time period

Now take the log both sides

ln2 = ln (1.2044)^time period

ln2 - time period ln (1.2044)

So,

time period = ln(2) ÷ ln (1.2044)

= 3.73 years or 4 years approx

3 0
3 years ago
some countries prohibit national firms from investing in specific countries for blank reasons, such as us firms being prohibited
Murljashka [212]

Sanctions put prohibited on actions related to specific nations, conduct themes, commodities and services, or people and companies. Cuba's economy is a mixed command economy that is predominately made up of state-run businesses.

The state employs the vast majority of the labour force. The Cuban Communist Party, which was in power throughout that decade, prohibited the creation of worker cooperatives and independent business ventures. Financial and trade limitations imposed on a foreign nation are referred to as economic sanctions. These limitations are meant to make life difficult for the citizens of the foreign country so that they would put pressure on the government to change its political policies.

To learn more about prohibited, click here.

brainly.com/question/1083983

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6 0
1 year ago
Calculating inflation using a simple price index
nekit [7.7K]

Answer:

A. A new mobile device for personal computing became available for purchase.

C. Energy drinks became increasingly popular on college campuses between 2010 and 2012 due to significant improvements in flavor.

D. As the price of calculators rose, fewer students decided to buy them, opting instead to use the free calculators in their cell phones or on their computers.

Explanation:

A general increase in the price of commodities is known as inflation. the change in inflation is calculated using price index.

The statement that ilustrate why price indexes such as the CSPI might overstate inflation in the cost of going to collage are:

a new mobile device for personal computing became available for purchase.

as the price of calculators rose, fewer students decided to buy them, opting instead to use the free calculator in their cell phones or in their computers.

energy drinks became increasingly popular on collage between 2010 and 2012 due to significant improvements in flavour.

7 0
3 years ago
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