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

Question

Suppose you purchase a $1,000 TIPS on January 1, 2013. The bond carries a fixed coupon of 3 percent. Over the first two years, semiannual inflation is 4 percent, 2 percent, 3 percent, and 3 percent, respectively. For each six-month period, calculate the accrued principal and coupon payment. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Answers Are NOT:

Accrued

1000   

1015.60

1031.14

1047.07

Coupon

15.60 (this is the answer for first 6 month coupon payment)

15.54

15.93

16.18

Suppose you purchase a $1,000 TIPS on January 1, 2013. The bond carries a fixed coupon of 3 percent. Over the first two years, semiannual inflation is 4 percent, 2 percent, 3 percent, and 3 percent, respectively. For each six-month period, calculate the accrued principal and coupon payment. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

time principal semi annual inflation adjusted principal coupon rate coupon amount first 6 months 1000 4% 1040 1.50% 15.60 second 6 months 1040 2% 1060.8 1.50% 15.91 third 6 months 1060.80 3% 1092.62 1.50% 16.39 fourth 6 months 1092.62 3% 1125.40 1.50% 16.88 time principal semi annual inflation adjusted principal coupon rate coupon amount first 6 months 1000 4% 1000+(1000*4%) .3/2 1040*1.50% second 6 months 1040 2% 1040(1040*2%) .3/2 1060.81.50% third 6 months 1060.80 3% 1060.8(1060.80*3%) .3/2 1092.62*1.50% fourth 6 months 1092.62 3% 1092.62(1092.62*3%) .3/2 1125.40*1.50%

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