Question
Suppose a portfolio manager purchases $1 million of par value of a treasury inflation protection security. The yield is 2.4%. a. Assume that the end
Suppose a portfolio manager purchases $1 million of par value of a treasury inflation protection security. The yield is 2.4%.
a. Assume that the end of the first six months the CPI is 2.6% (annual rate). Compute (1) the inflation adjustment to principal at the end of the first six months, (2) the inflation-adjusted principal at the end of the first six months, and (3) the coupon payment made to the investor at the end of the first six months.
b. Assume that the end of the second six months the CPI is 1.8% (annual rate). Compute (1) the inflation adjustment to principal at the end of the second six months, (2) the inflation-adjusted principal at the end of the second six months, and (3) the coupon payment made to the investor at the end of the second six months.
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Finance Operations
Authors: Charles Finley
1st Edition
1491292423, 978-1491292426
