The following questions are about Treasury Inflation Protected Securities (TIPS). a. What is meant by the real
Question:
The following questions are about Treasury Inflation Protected Securities (TIPS).
a. What is meant by the "real rate"?
b. What is meant by the "inflation-adjusted principal"?
c. Suppose that the coupon rate for a TIPS is 3%. Suppose further that an investor purchases $10,000 of par value (initial principal) of this issue today and that the semiannual inflation rate is 1%.
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