securities on the market. As an investor looking for protection against inflation, you are considering the purchase of inflation-adjusted bonds known as U.S. Treasury Inflation-Protected Securities (TIPS). With these securities, the face value (which is paid at maturity) is regularly adjusted to account for inflation; however, the semiannual interest payment (called the bond dividend) remains the same. You purchased a 10-year $10,000 TIPS bond with dividend of 4% per year payable semiannually (i.e., $200 every 6 months). Assume there is no inflation adjustment for the first 5 years, but in years 6 through 10, the bond face value increases by $1200 each year. You use an expected investment return of 14.5% per year compounded semiannually. What will be the equivalent future worth of the total money received with dividend reinvestment included? The future worth of all the income received would be $

securities on the market. As an investor looking for protection against inflation, you are considering the purchase of inflation-adjusted bonds known as U.S. Treasury Inflation-Protected Securities (TIPS). With these securities, the face value (which is paid at maturity) is regularly adjusted to account for inflation; however, the semiannual interest payment (called the bond dividend) remains the same. You purchased a 10-year $10,000 TIPS bond with dividend of 4% per year payable semiannually (i.e., $200 every 6 months). Assume there is no inflation adjustment for the first 5 years, but in years 6 through 10, the bond face value increases by $1200 each year. You use an expected investment return of 14.5% per year compounded semiannually. What will be the equivalent future worth of the total money received with dividend reinvestment included? The future worth of all the income received would be $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You were released from your current job and received a settlement of $54,000. The Canada Revenue Agency allows you to place the settlement in an RRSP. Fifteen years from now, you intends to transfer the money from the RRSP to a Registered Retirement Income Fund (RRIF). Thereafter, you will make equal withdrawals at the end of each quarter for fifteen years. If both the RRSP and the RRIF earn 6% compounded quarterly, what will be the amount of each withdrawal?$3,380.25 $3,320.25 $3,150.25$3,550.25 $3,350.25
Assume that on Friday, August 1, you buy one Chicago Board of Trade September Treasury bond futures contract at the opening price of $97800. The initial margin requirement is $2500 and the maintenance margin requirement is $2000. The settlement price of the contract at closing on that day is $97400. The settlement price of the contract at closing on the next business day (August 4) is $98000. Your margin account balance at the end of the day on August 4 is $_______
Joe just completed his engineering degree and started to work for an engineering firm. Joe wants to retire early after 30 years working. He plans to invest $5,000 at the end of every year for a 30-year career. If Joe needs $3,954,750 (about $1,400,000 in today's dollars accounting for an expected 3.5% inflation rate) in savings at retirement, what interest rate must the investment earn?
M. Poirot wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate of 10.09% with bond interest payable semiannually. Six years ago, $1,162 was paid for the bond. At least a 12% return (yield) on the investment is desired. The minimum selling price must be: Enter your answer as follow: 1234.56
Recently, the European Central Bank (ECU) has been worried about inflation and thus needs to make a decision about interest rates, and thus the resulting bond prices. Assume we are talking about Euron an Savings Bonds (ESB) and you are given the following information: The European Savings Bond (ESB) has no expiration date: The ESB price =$1,000 the ESB has a fixed annual interest payment =$10, ' e ESB annual interest rate =10 percent. If the price of the ESB increases to $5,000, the interest rate will Multiple Choice ◻ rise to 50 percent. ◻ fall to 4 percent. ◻ fall to 5 percent. ◻ rise to 12 percent. ◻ fall to 2 percent.
If your portfolio expected annual average total return was 10% and long-term inflation was about 3%, what would your REAL average annual returns be with a 100% equity portfolio? 10% 7% 3% 5% If you put your retirement funds in a savings account earning 0.5% and inflation was 3%, how much would you lose in value each year against inflation by not earning more than inflation on your retirement savings? 0.5% less 3% for minus 2.5% 3% 0.5% 10.2%
A corporate bond returns 12 percent of its cost (in present value terms) in the first year, 11 percent in the second year, 10 percent in the third year, and the remainder in the fourth year. What is the bond's duration in years? Please show all the steps including the equation.
Suppose that a bond is purchased between coupon periods. The days between the settlement date and the next coupon period is 115. There are 183 days in the coupon period. Suppose that this bond has a coupon rate of 7.4% and there are 10 semiannual coupon payments remaining. Assuming that the par value is $100, what is the “clean price” for this bond if a 5.6% discount rate is used? What is the accrued interest for this bond? What is the “dirty price?”
10. A plain vanilla interest rate swap is written on a notional principal of €100m. The swap pays 3.6% per annum in return for the 3- month LIBOR. Payments are made every 6 months and the swap has 10 months remaining to maturity. The 3-month LIBOR 2 months ago was 3.2% per annum. The swap rate for all maturities is currently 3.8% with continuous compounding. What is the value, in Euros, of the swap to the party paying floating? а. -119,195.16 b. 1,941,376 c. 82,477.03 d. 83,001.04 е. -82,477.00
M. Poirot wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate of 8.45% with bond interest payable semiannually. Six years ago, $1,478 was paid for the bond. At least a 12% return (yield) on the investment is desired. The minimum selling price must be: Enter your answer as follow: 1234.56
Maria, who is now 51 years old, is employed by a firm that guarantees her a pension of $35,000/year at age 65. What is the present value of her first year's pension if the inflation over the next 14 years is 3%/year compounded continuously? 4%/year compounded continuously? 6%/year compounded continuously? (Round your answers to the nearest cent.)
It is July 30, 2021. The cheapest-to-deliver bond in a September 2021 Treasury bond futures contract is a 13% coupon bond, and delivery is expected to be made on September 30, 2021. Coupon payments on the bond are made on February 4 and August 4 each year. The term structure is flat, and the rate of interest with semiannual compounding is 12% per annum. The conversion factor for the bond is 1.5. The current quoted bond price is $110. Calculate the quoted futures price for the contract.