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The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Coupon Payment Principal Repayment Total Payment Time 0 1 2
The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Coupon Payment Principal Repayment Total Payment Time 0 1 2 3 4.00% 3.00 3.00 Par Value $1,000.00 1,040.00 1,071.20 1, 103.34 $83.20 85.70 88.27 0 0 1,103.34 $ 83.20 85.70 1,191.60 a. What is the nominal rate of return on the bond in year 2? If real rate of return is 8.00% per annum (Round your answer to 2 decimal places.) Nominal rate of return in year 2 % b. What is the real rate of return in year 2? (Round your answer to 2 decimal places.) Real rate of return in year 2 % c. What is the nominal rate of return on the bond in year 3? (Round your answer to 2 decimal places.) Nominal rate of return in year 3 % d. What is the real rate of return in year 3? (Round your answer to 2 decimal places.) Real rate of return in year 3 %
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