A) What is the real rate of return in year 2? (Round your answer to 2 decimal places.)

B) What is the nominal rate of return on the bond in year 3? (Round your answer to 2 decimal places.)

The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Time Coupon Payment Principal Repayment + = Total Payment 1 WNPO Par Value $1,000.00 1,040.00 1,071.20 1,103.34 4.00% 3.00 3.00 2 3 $83.20 85.70 88.27 $ 0 0 1,103.34 $ 83.20 85.70 1,191.60 The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Time Coupon Payment Principal Repayment + = Total Payment 1 WNPO Par Value $1,000.00 1,040.00 1,071.20 1,103.34 4.00% 3.00 3.00 2 3 $83.20 85.70 88.27 $ 0 0 1,103.34 $ 83.20 85.70 1,191.60