1. Recall that TIPS are inflation adjusted treasury securities which account for inflation by adjusting the principal value of the bond. Imagine that at the beginning of the year you bought a TIPS with a principal value of $1000, and a promised rate of interest of 3.22%. Interest is paid annually at the end of the year. If during the year the reported inflation rate is 0.62%, what will be the dollar amount of the interest payment that you will receive at the end of the year?
2. Imagine you just paid $943 for a 1-year treasury bill, which promises to pay you $1000 in one year. What is your expected return on this investment for the year, if you hold it to maturity? Enter answer in percents, accurate to 2 decimal places.
3. You are looking to buy a $1000 face value bond, with 3 years to maturity, annual coupon (interest) payments, and a stated coupon rate of 4.4%. If the prevailing market interest rates are 5.1% for bonds of similar riskiness and maturity, what is the market price of this bond?

4. Imagine you are taking out a 10,000 USD loan, at a rate of 10.3% per year. In exchange, you promise to make 5 equal annual payments at the end of each year for the next five years. What must be the amount of each of your payments in order to satisfy the lender? You must set the payment to such an amount that the sum of the present values of all of them add up to 10,000 USD, so that the lender is willing to give you that money in exchange for your future promised payments. Recall the present value of annuity formula we derived in class - it might be helpful here.