Ask Question
4 November, 10:15

If the rate of inflation remains the same at 2% during the 5-year life of a TIPS bond with a coupon of 3%, what would the nominal value of the bond be at maturity to the nearest dollar?[A] $1,000[B] $1,060[C] $1,104[D] $1,160

+3
Answers (1)
  1. 4 November, 10:35
    0
    C $1,104

    Explanation:

    TIPS are the form of bonds which are specially designed for the purpose to protect the investors against the inflation.

    The principal value of the bond in case of TIPS is adjusted for yearly inflation.

    Based on the above discussion the value of TIPS bond can be calculated using the below formula:

    Value of bond at maturity=Principal amount (1+inflation rate) ^5

    =1,000 (1+2%) ^5

    =1,104

    So the answer is C $1,104
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “If the rate of inflation remains the same at 2% during the 5-year life of a TIPS bond with a coupon of 3%, what would the nominal value of ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers