Consider a 2.80 percent TIPS with an issue CPI reference of 187.3. At the beginn

Question

Consider a 2.80 percent TIPS with an issue CPI reference of 187.3. At the beginning of this year, the reference CPI was 196.0 and was at 204.9 at the end of the year.

What was the capital gain of the TIPS in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

What was the capital gain of the TIPS in percentage? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Consider a 2.80 percent TIPS with an issue CPI reference of 187.3. At the beginning of this year, the reference CPI was 196.0 and was at 204.9 at the end of the year.

Explanation / Answer

Gain = End of Year Value - Beginning of Year value

Gain = 204.9 / 187.3 * 1,000 – 196 / 187.3 * 1,000

Gain = 1,093.97 – 1,046.45

Gain = $47.52

Gain percentage = 47.52/1,046.45

Gain percentage = 4.54%

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