A financial analyst at JPMorgan Chase is evaluating a Treasury Inflation-Protected Security (TIPS bond) with a 3-year maturity, par value of $1,000, and a 8% coupon rate. The estimated average inflation rate will be 5% over the first year, 5% over the second year, and 5% over the third year.

1. What is the amount of the coupon payment the bond holder will receive in the first year?

2. Second year?

3. What will be the face value of the bond at the end of the first year?

4. Second year?