Judy Johnson is choosing between investing in two Treasury securities that mature

| September 29, 2018

Judy Johnson is choosing between investing in two Treasury securitiesthat mature in fi ve years and have par values of $1,000. One is aTreasury note paying an annual coupon of 5.06 percent. The other isa TIPS which pays 3 percent interest annually.a. If infl ation remains constant at 2 percent annually over thenext fi ve years, what will be Judy’s annual interest incomefrom the TIPS bond? From the Treasury note?b. How much interest will Judy receive over the fi ve years fromthe Treasury note? From the TIPS?c. When each bond matures, what par value will Judy receivefrom the Treasury note? The TIPS?d. After fi ve years, what is Judy’s total income (interest 1 par)from each bond? Should she use this total as a way of decidingwhich bond to purchase?.chegg.com/homework-help/questions-and-answers/judy-johnson-choosing-investing-two-treasury-securities-mature-fi-ve-years-par-values-1-00-q5484086#”>

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