Assume a $1,000 Treasury inflation-protected bond has a 2 percent coupon and a face value at issuance of $1,000. The reference CPI is 202.34 and the current CPI is 203.18. What do you know for certain about this bond?

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Mireya Hahn

4 January, 11:45

Assume a $1,000 Treasury inflation-protected bond has a 2 percent coupon and a face value at issuance of $1,000. The reference CPI is 202.34 and the current CPI is 203.18. What do you know for certain about this bond?

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Raelynn Baxter · Answer 1

The bond has a 2 percent coupon and a face value at issuance of $1000 which is the same with the Treasury inflation-protected bond. However, the reference Consumer Price Index (CPI) which is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services has increased from 202.34 to 203.18. From this deduction, what I know for certain about this bond is that the interest payment have increased and the coupon rate is still 2 percent.