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Suppose that an 8% coupon CPI-linked bond paying annual coupons is issued with a face value of $100 and a term of five years. Suppose
Suppose that an 8% coupon CPI-linked bond paying annual coupons is issued with a face value of $100 and a term of five years. Suppose that inflation, as measured by the CPI, is 2% during first two years and then 5% for the remaining three years. What are the face value and the coupon payment for the second year?
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