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Assume an inflation protection bond (TIPS) with 30 years remaining to expiration carries a coupon rate...

  1. Assume an inflation protection bond (TIPS) with 30 years remaining to expiration carries a coupon rate of 2.75% and is sold for $900. The par value of the bond is $1,000. Complete the table below and show all calculations in each cell.

YR

Inflation

Interest

Received

Accrued

Principal value

Interest earned due to inflation

Total return

ROR

(Nominal)

Real

ROR

1

2.0%

2

1%

3

0 %

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Answer #1

RoR(Nomnal) Reat ROR YR flation Interest Received Accyuedpinpl Int-Earecd Totol return Value 0.02x5(0do duue to Inf a45:/. x$

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