Consider an investor who, on January 1, 2019, purchases a TIPS
bond with an original principal of $111,000, an 10 percent annual
(or 5 percent semiannual) coupon rate, and 15 years to
maturity.
a. If the semiannual inflation rate during the
first six months is 0.5 percent, calculate the principal amount
used to determine the first coupon payment and the first coupon
payment (paid on June 30, 2019).
b. From your answer to part a, calculate the
inflationadjusted principal at the beginning of the second six
months.
c. Suppose that the semiannual inflation rate for
the second sixmonth period is 1.3 percent. Calculate the
inflationadjusted principal at the end of the second six months
(on December 31, 2019) and the coupon payment to the investor for
the second sixmonth period.
(For all requirements, round your answers to 2 decimal
places. (e.g., 32.16))





a. 
Coupon
payment 

b. 
Inflationadjusted principal 

c. 
Inflationadjusted principal at the end of the second six
months 


Coupon payment 

