TIPS Capital Return Consider a 3

question 102

Multiple Choice

TIPS Capital Return Consider a 3.25% TIPS with an issue CPI reference of 186.7. At the beginning of this year, the CPI was 197.5 and was at 202.4 at the end of the year. What was the capital gain of the TIPS in dollars? (Assume semi-annual interest payments and $1,000 par value.)

• A) $4.90
• B) $10.80
• C) $15.70
• D) $26.25

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Definitions:

Business Combination

Occurs when one company acquires control over another, resulting in the merging of assets, liabilities, and operations into a single entity.

One-Line Consolidation

A method of including a subsidiary's information in a parent company's financial statements by a single line representing the investment's net value.

Consolidation

The process of combining the financial statements of a parent company with those of its subsidiaries to present the accounts as if the group of companies was a single entity.

Cost Method

An accounting technique used to record investments at their original purchase cost, adjusting for dividends received and not for changes in market value.