Suppose that the coupon rate for a TIPS is 2%. The CPI at issue date is 120. Suppose further that an investor purchases $10,000 of par value of this issue at issue date. TIPS pay semiannual coupons.

a. At the end of the first six months, the CPI becomes 130. What is the amount of coupon interest (in dollars) that will be paid to this investor at the end of the first six months?

b. At the maturity, the CPI drops to 110, what would be the final coupon payment paid to the bondholder?