Suppose you purchase a $1,000 TIPS on January 1, 2013. The bond carries a fixed coupon of

Question:

Suppose you purchase a $1,000 TIPS on January 1, 2013. The bond carries a fixed coupon of 1 percent. Over the first two years, semiannual inflation is 2 percent, 3 percent, 1 percent, and 2 percent, respectively. For each six-month period, calculate the accrued principal and coupon payment.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...