Consider an investor who purchases a Treasury inflation-indexed bond with an original principal amount of $1,000, a 5.750 percent annual coupon rate (coupon is paid semiannually), and 30 years to maturity. The semiannual inflation rate during the 6 months ending 3 months before the first coupon payment (the 3-month lag is necessary to allow for the release of the official CPI figures) is 2.50 percent. Over the next 6-month period inflation is 1.54 percent. Calculate the second semi-annual coupon payment based on adjusted principal.

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To calculate the second semiannual coupon payment based on the adjusted principal we n... View the full answer