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Question: 40 points assume an inflation protection bond tips with 30...

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40 points

  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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