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TIPS Capital Return Consider a 4.00 percent TIPS with an issue CPI reference of 185.10. At the beginning of this year, the CPI was 192.20 and was at 202.60 at the end of the year. What was the capital gain of the TIPS in percentage terms?
a. 5.41%.
b. 7.10%.
c. 5.13%.
d. 10.40%.

Respuesta :

Parrain

Answer: a. 5.41%

Explanation:

The TIPS price at the beginning of the year was:

= Beginning of year CPI / Issue CPI * price

= 192.20 / 185.10 * 1,000

= $1,038.36

End of the year:

= 202.60 / 185.10 * 1,000

= $1,094.54

Capital gain = (Ending value - Beginning value) / Beginning value

= (1,094.54 - 1,038.36) / 1,038.36

= 5.41%

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