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.)

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

$1060.8x3%/2 = $15.91

Accrued
Principal Coupon
Payment   First 6 months $1000(1.04) = $1,040 $1040x3%/2 = $15.6   Second 6 months $1040(1.02) = $1,060.8

$1060.8x3%/2 = $15.91

  Third 6 months $1060.8(1.03) = $1,092.62 $1092.62x3%/2 = $16.39   Fourth 6 months $1092.62(1.03) = $1,125.40 $1125.40 x 3%/2 = $16.88

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