Consider a 2 1/2 TIPS maturing in ten years, trading at par. Assume you purchase the TIPS and sell it after six months, when it trades at 𝑦𝑟 ′ = 1% (real semi-annual periodic rate). Also the inflation rate for the six months to be 1%. Calculate the rate of return on your investment. (Hint: not that with a TIPS the semi-annual coupon is adjusted over time because of inflation, you can assume M=100,000.)
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