Problem 10-19 (Algo) Required: Refer to the table below and calculate both the real and nominal rates of return on the TIPS bond in the second and third years. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Principal and Interest Payments for a Treasury Inflation Protected Security Inflation Time 0 1 2 3 in Year Just Ended 18 1 1 Nominal return Real return Par Value $1,000.00 1,010.00 1,020.10 1,030.30 Second Year % % Coupon Principal Payment + Repayment = $ 40.40 40.80 41.21 Third Year 0 0 $ 1,030.30 % % Total Payment $ 40.40 40.80 1,071.51
Problem 10-19 (Algo) Required: Refer to the table below and calculate both the real and nominal rates of return on the TIPS bond in the second and third years. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Principal and Interest Payments for a Treasury Inflation Protected Security Inflation Time 0 1 2 3 in Year Just Ended 18 1 1 Nominal return Real return Par Value $1,000.00 1,010.00 1,020.10 1,030.30 Second Year % % Coupon Principal Payment + Repayment = $ 40.40 40.80 41.21 Third Year 0 0 $ 1,030.30 % % Total Payment $ 40.40 40.80 1,071.51
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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Transcribed Image Text:Problem 10-19 (Algo)
Required:
Refer to the table below and calculate both the real and nominal rates of return on the TIPS bond in the second and third years. (Do
not round intermediate calculations. Round your answers to 2 decimal places.)
Principal and Interest Payments for a Treasury Inflation Protected Security
Inflation
Time
0
1
2
3
in Year
Just Ended
Nominal return
Real return
1%
1
1
Par Value
$1,000.00
1,010.00
1,020.10
1,030.30
Second Year
%
%
Coupon
Principal
Payment + Repayment
$ 40.40
40.80
41.21
Third Year
0
0
$ 1,030.30
%
%
=
Total
Payment
$ 40.40
40.80
1,071.51
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