Consider a 2.55 percent TIPS with an issue CPI reference of 187.8. At the beginning of this year, the reference CPI was 196.5 and was at 204.4 at the end of the year.
What was the capital gain of the TIPS in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Capital gain $
What was the capital gain of the TIPS in percentage? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Capital gain %
To calculate the capital gain of the TIPS in dollars, we'll need to determine the increase in the Consumer Price Index (CPI) from the beginning of the year to the end of the year.
The formula for calculating the capital gain in dollars is given by:
Capital Gain in Dollars = Principal Amount x (Ending CPI - Beginning CPI) / Beginning CPI
Here's how we can calculate the capital gain:
1. Calculate the capital gain in dollars:
Principal Amount = 100 (assuming a principal amount of $100)
Ending CPI = 204.4
Beginning CPI = 196.5
Capital Gain in Dollars = 100 x (204.4 - 196.5) / 196.5
Let's calculate this:
Capital Gain in Dollars = 100 x (7.9) / 196.5
Capital Gain in Dollars ≈ $3.18
Therefore, the capital gain of the TIPS in dollars is approximately $3.18.
To calculate the capital gain of the TIPS in percentage, we can use the following formula:
Capital Gain in Percentage = (Capital Gain in Dollars / Principal Amount) x 100
Let's calculate this:
Capital Gain in Percentage = (3.18 / 100) x 100
Capital Gain in Percentage ≈ 3.18%
Therefore, the capital gain of the TIPS in percentage is approximately 3.18%.