1. You buy a TIPS at issue at par for $1,000. The bond has a 4.7% coupon. Inflation turns out to be 3.7%, 4.7%, and 5.7% over the next 3 years. The total annual coupon income you will receive in year 3 is _________.
A) $47.00
B) $49.21
C) $53.94
D) $51.70
2. A coupon bond that pays interest of $52 annually has a par value of $1,000, matures in 5 years, and is selling today at a $73.25 discount from par value. The current yield on this bond is _________.
A) 5.20%
B) 5.61%
C) 7.73%
D) 5.49%