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Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a (real) coupon of 7% paid annually. If you buy the bond
Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a (real) coupon of 7% paid annually. If you buy the bond at its face value of $1,000, and the inflation rate is 10%. a. What will be your cash flow at the end of the year? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Cash flow b. What will be your nominal rate of return? Interest rates during the year are unchanged
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