Indicate whether the following statement is true or false. Provide explanation o

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Indicate whether the following statement is true or false. Provide explanation or calculation to support your answer. 1. Inflation-indexed Treasury bonds are intended for investors who wish to ensure that the returns on their investments keep up with the increase in interest rate over time. A ten-year, inflation-indexed bond has a par value of $10,000 and a coupon rate of 4.5 percent. During the first six months since the bond was issued, the inflation rate was 2.5 percent. Based on this information, the coupon payment after six months will be $250. The inflation is expected to increase to 2.8% after the first six months, therefore, the coupon payment after twelve months (2nd coupon payment) will be $237.08 a. True b. False Explanation

Explanation / Answer

ans: True

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