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 in Year Time Just Ended 0 1 2 3 Nominal return Real return 18 1 1 Coupon Payment Par Value $1,000.00 1,010.00 $40.40 1,020.10 1,030.30 Second Year 40.80 41.21 % % + Principal Repayment $1,030.30 Third Year 0 0 % % = $ Total Payment 40.40 40.80 1,071.51
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 in Year Time Just Ended 0 1 2 3 Nominal return Real return 18 1 1 Coupon Payment Par Value $1,000.00 1,010.00 $40.40 1,020.10 1,030.30 Second Year 40.80 41.21 % % + Principal Repayment $1,030.30 Third Year 0 0 % % = $ 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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Question

Transcribed Image Text: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
in Year
Time Just Ended
0
1
23
Nominal return
Real return
1%
1
1
Par Value
$1,000.00
1,010.00
1,020.10
1,030.30
Second Year
Coupon
Payment
$40.40
40.80
41.21
%
%
+
Principal
Repayment
$1,030.30
Third Year
0
0
%
%
=
$
Total
Payment
40.40
40.80
1,071.51
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