Assume an inflation protection bond (TIPS) with 30 years remaining to expiration carries a coupon rate of 4.25% and is sold for $900. 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

3.0%

2

2%

3

1 %

4

Minus 1%

It is a negative rate of inflation