Jim Thome is planning to buy a US TIPS with a coupon rate of 1.25% and three years to maturity.  The TIPS has an initial face value of $100 and is currently selling for par.  If inflation in the three years is 2.5%, -2.8% (deflation) and 1.6% respectively, calculate the change in taxable income for him for the three years.  Why would you advise him to buy the TIPS in a tax deferred account like an IRA (use specifics from the bond)? 

Answer rating: 100% (QA)

Assuming that Thome is in the 25 tax bracket his taxable i... View the full answer