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Consider an investor who purchases a Treasury inflation - indexed note with an original principal amount of $ 1 0 0 , 0 0 0

Consider an investor who purchases a Treasury inflation-indexed note with an original principal amount of $100,000, a 3.125 percent annual coupon rate (coupon is paid semiannually), and 10 years to maturity. The semiannual inflation rate during the 6 months ending 3 months before the first coupon payment (the 3-month lag is necessary to allow for the release of the official CPI figures) is 3.41 percent. Over the next 6-month period inflation is 1.25 percent. Calculate the adjusted principal amount for the second coupon payment.

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