Question

10. A dealer formation, at what price is a dealer willing to sell this T-bill quotes 90-day T-Bill with a face value of $1,000 at 4.80% bid and 4.10% ask Given this in- 11. investor purchased a TIPS with face value of Si ,00,00 and a 2% perce iannually). What will the second coupon payment if the semiannual inflation during the first six months was 2.8% while the semiannual inflation over the second six months was 22%? nt annual coupon (paid sem

Answer 1

1-	price of T-bill	1000*[1-(.048*90)/360]	1000*.988	988
2-	period	value of TIPS = face value*(1+inflation rate)	adjusted value of TIPS	coupon rate	Interest payment
	0	1000000	1000000	2%	0
	1	1000000*1.028	1028000	2%	20560
	2	1028000*1.022	1050616	2%	21012.32
	second coupon payment				21012.32