A $1,000 Treasury inflation-protected security is currently selling for $965 and carries a coupon interest rate of 3.35 percent. a. If you buy this bond, how much will you receive for your first interest payment, assuming no interest adjustment to principal during this time period? b. If there's a 0.86 percent increase in inflation, what will be the new par value of the bond? c. What is your new semiannual interest payment? d. What would the par value be at maturity, assuming a 3.00 percent annual inflation rate and ten-year maturity period? Click on the table icon to view the FVIF table C... a. If you buy this bond, assuming no interest adjustment to principal during this time period, your first interest payment would be $ 16.75. (Round to the nearest cent.) b. If there's a 0.86 percent increase in inflation, the new par value would be $1008.60. (Round to the nearest cent.) c. The new semiannual interest payment is $ (Round to the nearest cent.)

A $1,000 Treasury inflation-protected security is currently selling for $965 and carries a coupon interest rate of 3.35 percent. a. If you buy this bond, how much will you receive for your first interest payment, assuming no interest adjustment to principal during this time period? b. If there's a 0.86 percent increase in inflation, what will be the new par value of the bond? c. What is your new semiannual interest payment? d. What would the par value be at maturity, assuming a 3.00 percent annual inflation rate and ten-year maturity period? Click on the table icon to view the FVIF table C... a. If you buy this bond, assuming no interest adjustment to principal during this time period, your first interest payment would be $ 16.75. (Round to the nearest cent.) b. If there's a 0.86 percent increase in inflation, the new par value would be $1008.60. (Round to the nearest cent.) c. The new semiannual interest payment is $ (Round to the nearest cent.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

A $1,000 Treasury inflation-protected security is currently selling for $965 and carries a coupon interest rate of 3.35 percent.
K
a. If you buy this bond, how much will you receive for your first interest payment, assuming no interest adjustment to principal during this
time period?
b. If there's a 0.86 percent increase in inflation, what will be the new par value of the bond?
c. What is your new semiannual interest payment?
d. What would the par value be at maturity, assuming a 3.00 percent annual inflation rate and ten-year maturity period? Click on the table icon
to view the FVIF table i
...
a. If you buy this bond, assuming no interest adjustment to principal during this time period, your first interest payment would be $ 16.75
(Round to the nearest cent.)
b. If there's a 0.86 percent increase in inflation, the new par value would be $1008.60. (Round to the nearest cent.)
c. The new semiannual interest payment is $
(Round to the nearest cent.)
pr

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