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Homework answers / question archive / A 10-year bond has a par value of $1,000 and a coupon rate of 5 percent
A 10-year bond has a par value of $1,000 and a coupon rate of 5 percent. During the first six months after the bond was issued, the inflation rate was 1.3 percent. By how
much does the principal of the bond
increase? What is the coupon payment
after six months?
Assuming it is a TIPS or inflation indexed bond
Principal after six months=1000*(1+1.3%)=1013.00
Increase=1013.00-1000=13.00
Coupon payment after six months=1013*5%/2=25.33
