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

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 11PROB

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