Indexed bonds make payments that are tied to some price index. Consider a newly issued bond with a three-year maturity, par value of $1,000, and a 5% coupon paid annually.

1. Complete the following table

Time	Inflation	Par Value	Coupon Payment	Par Value Payment
0	-	$1,000	-	-
1	4%
2	3%
3	2%

2. Calculate the nominal and real returns for the second year and the third year.