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Problem 1 Consider a newly issued TIPS bond with a three-year maturity, par value of $1000, and a coupon rate of 5%. Assume annual coupon

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Problem 1 Consider a newly issued TIPS bond with a three-year maturity, par value of $1000, and a coupon rate of 5%. Assume annual coupon payments. Inflation in Year 1 Year Just Ended 1 2% 2 3% 2% 3 a) Determine the total bond payments for each of the 3 years. (11 points) b) Determine the nominal and real rates of return for the bond in the second year. (5 points)

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