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QUESTION
Assume that you purchase a TIPS for $1,000 when it is first issued, and it pays a 1.85% coupon rate.
Assume that you purchase a TIPS for $1,000 when it is first issued, and it pays a 1.85% coupon rate. If the CPI inflation rate is 3%, 4%, 5% and 7% over the next four years, what will be the new par value of the bond and the new annual coupon payment at the end of four years?
