Suppose that the coupon rate for a 5 year TIPS is 2%, payable semi-annually. Suppose further that an investor purchases $10,000 of par value initial principal) of this issue today and that the annual inflation rate is -3%. a. What is the inflation-adjusted principal at the end of six months? (3 points) b. What is the dollar coupon interest that will be paid in cash at the end of the first six months? (3 points) c. Suppose that there is deflation for the entire five year period. What is the principal that will be paid by the Department of the Treasury at the maturity date? (2 points) Question 3 (10 points) Consider the following fixed-rate level payment mortgage: Maturity = 20 years; amount borrowed $500,000; mortgage rate = 6% per annum a. Calculate the monthly mortgage payment. (4 points) b. Calculate i) the interest, ii) scheduled principal payment for the first month and iii) the outstanding balance of the mortgage loan at the beginning of the second month. (6 points)