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You have invested in a Treasury Inflation Protected Security (TIPS) that has a par value of $1,000 and a coupon rate of 2.55%. You paid
You have invested in a Treasury Inflation Protected Security (TIPS) that has a par value of $1,000 and a coupon rate of 2.55%. You paid par value for the security, and it matures in two years. Assume that the inflation rate for next year is 2.55% and for the year after is 2.57%.
Complete the following table by calculating the par values, the coupon payments, the principal repayment, the total payments, and the nominal and real rates of return for the next two years. (Round your answers to 2 decimal places.)
Time | Inflation in Year Just Ended | Par Value | Coupon Payment | Principal Repayment | Total Payment | Nominal Return | Real Return |
0 | $ | ||||||
1 | % | $ | $ | $ | $ | % | % |
2 | % | $ | $ | $ | $ | % | % |
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