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Indonesia issues an inflation-indexed 3-year, 4% annual coupon bond issued at par (Present Value =Par Value = 1000 Indonesian rupiah initially). Inflation in Indonesia increases

Indonesia issues an inflation-indexed 3-year, 4% annual coupon bond issued at par (Present Value =Par Value = 1000 Indonesian rupiah initially). Inflation in Indonesia increases by 5 % in year 1, by 4 % in year 2, and zero % in year 3. What is the coupon payment on the bond in Indonesian rupiah in year 2?

a.

Rupiah 40.00

b.

Rupiah 41.60

c.

Rupiah 42.00

d.

Rupiah 43.68

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