Suppose a portfolio manager purchases a $2 mi of par value of Treasury Inflation protection Security (TIPS). The real rate determined at the auction is 3.5%. Assume that the CPI-U is likely to be 3.2% (annual rate) for the next 2 years. 1- Inflation adjustment to principal at the end of eighteen months is

A. $ 97,544

B. $ 97,644

C. $ 95,7 2-

Inflation adjusted principal at the end of eighteen months is

A. $ 2,197,544

B. $ 2,097,544

C. $ 2,095,744

The coupon payment to the investor at the end of eighteen months is

A. $ 36,707

B. $ 37,707

C. $ 37,607

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