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Question
Consider a newly issued TIPS bond with a 3-year maturity, par value of $1,000, and coupon rate of 5%. Assume annual coupon payments.
| Time | Inflation in year just ended | Par value | Coupon payment | + | Principal repayment | = | Total payment | ||||||||||||
| 0 | $ | 1000.00 | |||||||||||||||||
| 1 | 3 | % | $ | 1030.00 | $ | 51.50 | 0 | $ | 51.50 | ||||||||||
| 2 | 2 | % | $ | 1050.60 | $ | 52.53 | 0 | $ | 52.53 | ||||||||||
| 3 | 4 | % | $ | 1092.62 | $ | 54.63 | $ | 1092.62 | $ | 1,147.25 | |||||||||
What is the real rate of return on the TIPS bond in the first year?
A) 5%
B) 8.15%
C) 7.15%
D) 4%
Answer
This answer is hidden. It contains 33 characters.
Related questions
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Day
1 2 3 4 Advances
870 760 960 840 Declines
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Q:
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Q:
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A) investment management ethics
B) securities analysis
C) securities marketing techniques
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To become a CFA, you must do all of the following except which one?
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D) Divest all your own stock holdings to eliminate any potential conflicts of interest with client recommendations.
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Q:
In a defined contribution pension plan, the ________ bears all of the fund's investment performance risk.
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Q:
One of the major functions of the investment committee is to ________.
A) determine security selection of each portfolio operated by the investment company
B) translate the objectives and constraints of the investment company into an asset universe
C) determine the percentages of each security in the total investment company portfolio
D) calculate and report the overall rate of return to investment company constituents