(Some Finance Questions) Research Paper Example | Topics and Well Written Essays - 500 words

(Some Finance Questions) - Research Paper Example TIPs pay interest semi-annually at a fixed rate which is calculated on the adjusted principal to make the interest payments as well inflation driven (Treasury Direct). The market of TIPs is the world largest inflation indexed securities market with over $550 billion of TIPs outstanding i.e. approximately 8% of the total debt market of treasury. TIPs can be purchased directly from Treasury Direct system with a minimum purchase limit of $100 and multiples of $100 thereof and are available with 5-, 10-, and 30-year maturities. The 5-year and 30-year TIPs are auctioned semi-annually whereas 10-year TIPs are auctioned quarterly. The auction bids are TIPs are submitted both as competitive and non-competitive. In case of competitive bids, the bidder specifies the yield that he/she is willing to accept the security for. In case of non-competitive bid, the yield is determined at the auction which the bidder agrees to accept for a security. TIPs are issued in electronic form and can be like ot her marketable securities which can be held to maturity or sold before it matures. Interest paid on TIPs is subject to federal taxes but are exempted from both state and local taxes.