Suppose that the coupon rate for a TIPS is 3.5%. Suppose further that

an investor purchases $100,000 of par value (initial principal) of this

issue today and that the annualized inflation rate is 3%.

What is the inflation-adjusted principal at the end of 6 months?

What is the coupon payment at the end of 6 months?

If the annualized inflation rate over the following 6 months is 2%, what is the

coupon payment at the end of the year?