Suppose that the coupon rate for a TIPS is 5%. Suppose further that an investor purchases $20,000 of par value (initial principal) of this issue today and that the annual inflation rate is 3% for the first 6 months and 5% (annually) for the second 6 months of the year. Calculate the total dollar coupon interest that will be paid at the end of the first year.

 
Note: TIPS makes semi-annual coupon payments

Answer rating: 100% (QA)

To calculate the total dollar coupon interest paid at the end of the first year for the TIPS Treasur... View the full answer