You Buy a TIPS at Issue at Par for $1,000

question 57

Multiple Choice

You buy a TIPS at issue at par for $1,000.The bond has a 3% coupon.Inflation turns out to be 2%,3% and 4% over the next three years.The total annual coupon income you will receive in year three is _________.

• A) $30.00
• B) $33.00
• C) $32.78
• D) $30.90

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume, such as raw materials and direct labor.

Units Sold

A measure of the quantity of inventory items that a company has sold to its customers within a particular period.

Prime Cost

The combined cost of direct materials and direct labor involved in manufacturing a product.

Period Costs

Expenses directly tied to a specific time period, such as rent, utilities, and administrative salaries, and not directly to the production process.