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Suppose that you buy a TIPS (inflation-indexed) bond with a 2-year maturity and a coupon of 5.6% paid annually. Assume you buy the bond at
Suppose that you buy a TIPS (inflation-indexed) bond with a 2-year maturity and a coupon of 5.6% paid annually. Assume you buy the bond at its face value of $1,000, and the inflation rate is 10.40% in each year. a. What will be your cash flow in year 1? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cash flow b. What will be your cash flow in year 2? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cash flow c. What will be your real rate of return over the two-year period? (Enter your answer as a percent rounded to 1 decimal place.) Real rate of return % The following table shows some data for three zero-coupon bonds. The face value of each bond is $1,000. Bond A B Price $ 240 240 Maturity Yield to (Years) Maturity 25 9% 16 a. What is the yield to maturity of bond A? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places. Assume annual compounding.) Answer is complete but not entirely correct. Yield to maturity 4.800 X % b. What is the maturity of B? (Do not round intermediate calculations. Round your answer to 2 decimal places. Assume annual compounding.) Answer is complete but not entirely correct. Maturity 8.80 X years
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