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Suppose a portfolio manager purchases $1 million of par value of a Treasury inflation protection security. The real rate (determined at the auction) is 3.2%.

Suppose a portfolio manager purchases $1 million of par value of a Treasury inflation protection security. The real rate (determined at the auction) is 3.2%. a. Assume that at the end of the first six months the CPI-U is 3.6% (annual rate). 1) Compute the inflation adjustment to principal at the end of the first six months. 2) Compute the inflation-adjusted principal at the end of the first six months. 3) Compute the coupon payment made to the investor at the end of the first six months.

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