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Suppose that you buy a TIPS ( inflation - indexed ) bond with a 2 - year maturity and a ( real ) coupon of
Suppose that you buy a TIPS inflationindexed bond with a year maturity and a real coupon of paid annually. If you buy the
bond at its face value of $ and the inflation rate is in each year.
a What will be your cash flow in year
Note: Do not round intermediate calculations. Round your answer to decimal places.
b What will be your cash flow in year
Note: Do not round intermediate calculations. Round your answer to decimal places.
c What will be your real rate of return over the twoyear period?
Note: Enter your answer as a percent rounded to decimal place.
Real rate of return
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