A new index-linked gilt is issued on 1.1.2019. The gilt has a coupon rate of 0.25% of nominal paid twice yearly in arrears and the bond will mature in 25 years time at 110% of indexed nominal. There is a no time lag in indexing payments. The bond is indexed by reference to the Retail Prices Index and the relevant values are shown below.

1. Calculate the sale price of the bond on 1.1.2020 if the real rate of return is 1.5% per

   annum.

Year Jan April July Oct 2018 276.0 279.7 281.7 284.5 2019 283.0 288.2 289.5 290.4 2020 290.6 292.6 294.2 - Year Jan April July Oct 2018 276.0 279.7 281.7 284.5 2019 283.0 288.2 289.5 290.4 2020 290.6 292.6 294.2