You buy an inflation-adjusted treasury bond on June 15 2005. The face value of the bond is$5000. The bond is selling at par, with a coupon rate of 8% and semiannual coupon
payments. The bond has a maturity of 5 years. You expect the inflation to be 2% per year. What will be the nominal dollar amount of the coupon you receive on June 15 2008?
Note : in calculating multi-year inflation, you can use discrete compounding at the annual frequency.

Answer rating: 100% (QA)

First lets determine the number of coupon periods from June 15 2005 to June 15 2008 Since the bond h... View the full answer