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The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Time Coupon Payment Principal Repayment Total Payment 1 2 3

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The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Time Coupon Payment Principal Repayment Total Payment 1 2 3 $ Par Value $1,000.00 1,027.50 1,068.60 1,111.34 2.75% 4.00 4.00 $56.51 58.77 61.12 $ 56.51 58.77 1,172.47 1,111.34 a. What is the nominal rate of return on the bond in year 2? If real rate of return is 5.50% 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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