Table 14.1 Principal and interest payments for a Treasury Inflation Protected Security Inflation in Year Time Just Ended O 1 Return to Table 14.1, showing the cash flows for TIPS bonds. a. What is the nominal rate of return on the bond in year 2? b. What is the real rate of return in year 2? c. What is the nominal rate of return on the bond in year 3? d. What is the real rate of return in year 3? 2 3 2% 3 1 Par Value Coupon Payment + Principal Repayment = Total Payment $1,000.00 1,020.00 1,050.60 1,061.11 $40.80 42.02 42.44 The nominal rate of return on the bond in the first year is $ O 1,061.11 $40.80 42.02 1,103.55