One Year Ago, You Purchased a Newly-Issued TIPS Bond That

question 27

Multiple Choice

One year ago, you purchased a newly-issued TIPS bond that has a 6% coupon rate, five years to maturity, and a par value of $1,000. The average inflation rate over the year was 4.2%. What is the amount of the coupon payment you will receive, and what is the current face value of the bond?

• A) $60.00, $1,000
• B) $42.00, $1,042
• C) $60.00, $1,042
• D) $62.52, $1,042
• E) $102.00, $1,000

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Definitions:

Cognitive Development

The process by which a person's ability to think, reason, and problem solve grows and changes over time.

Abductive Reasoning

A form of logical inference that starts with an observation then seeks to find the simplest and most likely explanation.

Deductive Reasoning

Reasoning from a general statement, premise, or principle, through logical steps, to figure out (deduce) specifics. Also called top-down reasoning.

Digital Natives

Individuals who have been exposed to digital technology from a young age, often considered fluent in the use of computers, the internet, and digital devices.