Bond has a face value of $1,000, matures in five years on 31/12/2025, and pays annual coupons of 6%. The discount rate is 9.50%. Assume that We are on 31/12/2020

A. Assume that this bond is TIPS. The inflation rate published on 01/01/2020 is 2.00%. What is the new "par value* for this bond?

B. Based on your answer in (C), what is the new coupon value of this bond?

(4 marks)

C. Calculate the current bond price on 01/01/2020 assuming your answers in (A) and (B)