Question
Complete the following two tables using the TIPS and Treasuries for January 15, 2021 . TIPS Maturity Coupon Bid Asked Chg Yield* Accrued Principal 1/15/2024
Complete the following two tables using the TIPS and Treasuries for January 15, 2021.
TIPS | ||||||
Maturity | Coupon | Bid | Asked | Chg | Yield* | Accrued Principal |
1/15/2024 | 0.625 | 108.01 | 108.03 | -1 | -1.992 | 1115 |
1/15/2026 | 2.000 | 119.15 | 119.18 | +5 | -1.742 | 1311 |
Treasury Notes & Bonds | |||||
Maturity | Coupon | Bid | Asked | Chg | Asked Yield |
1/15/2024 | 0.125 | 99.2560 | 99.2620 | 0.0120 | 0.185 |
1/31/2026 | 2.625 | 110.2540 | 110.2600 | -0.0020 | 0.448 |
6. Complete the following two tables using the information in the two tables above. ^^^^^^
Security | Maturity | YTM (%) | = | Real rate of return (%) | + | Implied inflation rate in the market (%) |
3 Years (very rare to get this scenario with identical maturities and exactly three years out) | ||||||
Treasury note/bond | 1/15/2024 |
| = | + | ||
TIPS | 1/15/2024 | = |
| + | ||
~ 5 Years (very common to get slightly different maturities and not exactly five years out) | ||||||
Treasury note/bond | 1/31/2026 | = | + | |||
TIPS | 1/15/2026 | = | + |
Assume Bill believes with 100% certainty that the inflation rate will be 2.000% over the next 5 years. If Bill wants a 5-year investment, should he buy the Treasury note/bond or TIPS? | |
Assume Hillary believes with 100% certainty that the inflation rate will be 0.500% over the next 5 years. If Hillary wants a 5-year investment, should he buy the Treasury note/bond or TIPS? | |
Assume Barack believes with 100% certainty that the inflation rate will be 0.000% over the next 5 years. If Barack wants a 5-year investment, should he buy the Treasury note/bond or TIPS? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started