Consider a 3.75 percent TIPS with an issue CPI reference of 183.5. At the beginning of this year, the CPI was 190.6 and was at 199.4 at the end of the year. What was the capital gain of the TIPS in percentage terms? (Assume semiannual interest payments and $1,000 par value.)
A) 3.75 percent
B) 4.62 percent
C) 7.10 percent
D) 8.80 percent

Question

Quizplus · Accepted Answer

The capital gain is calculated by the change in the CPI over the year. The percentage change in CPI is (199.4 - 190.6) / 190.6 = 4.62%.