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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.
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Inflation | Interest Received | Accrued Principal value | Interest earned due to inflation | Total return | ROR (Nominal) | Real ROR | |
1 | 1.5%
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2% |
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3 | 1 %
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4 | Minus 1% It is a negative rate of inflation or deflation
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