Question

Consider a 3.00 percent TIPS with an issue CPI reference of 184.8. At the beginning of...

Consider a 3.00 percent TIPS with an issue CPI reference of 184.8. At the beginning of this year, the CPI was 191.5 and was at 201.6 at the end of the year. What was the capital gain of the TIPS in dollars? What was the capital gain of the TIPS in percentage?

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Answer #1

Capital gain of the TIPS in dollars

Capital gain of the TIPS in dollars = Ending Value of TIPS - Beginning Value of TIPS

= [1,000 x (201.60/184.80)] – [1,000 x (191.50/184.80)]

= 1,090.91 - 1,036.26

= 54.65

“Capital gain of the TIPS in dollars = 54.65”

Capital gain of the TIPS in percentage

Capital gain of the TIPS in percentage = [Capital gain of the TIPS in dollars / Beginning Value of TIPS] x 100

= [54.65 / 1,036.26] x 100

= 5.27%

“Capital gain of the TIPS in percentage = 5.27%”

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