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20 points Assume an inflation protection bond (TIPS) with 30 years remaining to expiration carries a coupon rate of 3.25% and is sold for $920.

20 points

Assume an inflation protection bond (TIPS) with 30 years remaining to expiration carries a coupon rate of 3.25%

and is sold for $920. The par value of the bond is $1,000.

Complete the table below and show all calculations in each cell.

YR

Inflation

Interest

Received

Accrued

Principal value

Interest earned due to inflation

Total return

ROR

(Nominal)

Real

ROR

1

1.5%

2

2%

3

1 %

4

Minus 1%

It is a negative rate of inflation or deflation

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