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principles of finance

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1. Compute the annual interest payments and principal amount for a Treasury Inflation- Protected Security with a par value of $ 1,000 and a 3 percent interest rate if inflation is 4 percent in year one, 5 percent in year two, and 6 percent in year three.
Nov 22nd, 2013

Proposal: i can help.. Please accept the answer.. Thanks

Nov 22nd, 2013

The principal amount moves with inflation or deflation. The corresponding interest payments are then based off the principal amounts.

Par Value : $1000 interest rate = .03

Year One) $1000 x 1.04 = $1040 x .03 = $31.20
Year Two) $1000 x 1.05= $1050 x .03 = $31.50
Year Three) $1000 x 1.06 = $1060 x .03 = $31.80

Nov 22nd, 2013

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Nov 22nd, 2013
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