Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14TIPS and STRIPSLarry StaffordBA 543Bonds: Remembering The BasicsPrincipal ValueCouponMarket ValueMaturityTreasury BondInterest Payment 6moInterest Payment 12moInterest Payment 18moInterest Payment 24moInterest Payment 30moInterest Payment 36moMaturity Payment 36moTreasury BondSeparate Trading of Registered Interest and Principal Securities (STRIPS)Pricing of STRIPSSource: Wall Street JournalSTRIPS•What good are they?–Lump Sum Savings Events–Eliminate Reinvestment Risk–No Credit Risk•Taxes–The Good–The Bad–The UglyHistory of STRIPSTreasury Animal Control1985: US Treasury STRIPS ProgramLIONS, TIGRS, and DOGS … oh my!1982: Created By Financial InstitutionsA Brief Interlude With Inflation1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100%1%2%3%4%5%6%7%Source: US BLSPrincipal ValuePrincipal ValueInflation (CPI) AdjustmentTreasury Inflation Protected Securities (TIPS)TIPS•What good are they?–Removing Risk of Inflation–No Credit Risk Investments•Taxes–Pay as you goHistory of TIPS•You Want How Much For That 80’s Rock Cassette Tape?–1997: US Treasury Began Offering TIPSInflation Revisited1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100%1%2%3%4%5%6%7%Source: US BLSHow Can I Get My Own TIPS and STRIPS?BrokerMutual FundETFTreasury Direct Website (TIPS)Take-AwayFinancial EngineeringTools For Every JobInflationNominal vs. Real ReturnTaxesWhen do you want to pay and will you have the cash?Applause and QuestionsLarry StaffordBA
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