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Problem 1 (20 points) You have invested in a Treasury loftation Protected Security (TIPS) that has a par value of $1.000, a coupon rate of

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Problem 1 (20 points) You have invested in a Treasury loftation Protected Security (TIPS) that has a par value of $1.000, a coupon rate of 4%, and a 3-year maturity. Assume that the bond makes annual coupon payments. Assume that inflation turns out to be 26,3%, and 1 in the next 3 years. Complete the following table by calculating the per values, the coupon payments, the principal repayment, the total payments, and the nominal and real tales of return for the next three years Inflation in Year Just Ended Real Coupon Payment Principal Repayment Time Nominal Return Total Payment Return Par Value 1,000.00 0 1 2% 3% 2 3 1%

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