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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 Consider an investor who, on January purchases a TIPS bond with an original principal of $ a percent coupon rate, and years to maturity. The inflationadjusted principal at the end of the first six months, on June is found by multiplying the original par value $ by the semiannual inflation rate. Ifthesemiannualinflationrateduringthefirstsixmonthsispercent, the principal amount used to determine the first coupon payment is How about the coupon payment? Supposethatthesemiannualinflationrateforthesecondsixmonth period is percent. Then the inflationadjusted principal at the end of the second six months is How about the second coupon payment?
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