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Example 6 - 6 Consider an investor who, on January 1 , 2 0 2 2 , purchases a TIPS bond with an original principal

Example 6-6 Consider an investor who, on January 1,2022, purchases a TIPS bond with an original principal of $100,000, a 4 percent coupon rate, and 10 years to maturity. The inflation-adjusted principal at the end of the first six months, on June 30,2022, is found by multiplying the original par value ($100,000) by the semiannual inflation rate. Ifthesemiannualinflationrateduringthefirstsixmonthsis0.5percent, the principal amount used to determine the first coupon payment is? How about the coupon payment? Supposethatthesemiannualinflationrateforthesecondsix-month period is 1 percent. Then the inflation-adjusted principal at the end of the second six months is? How about the second coupon payment?

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