Question

A 4.15 percent TIPS has an original reference CPI of 182.1. If the current CPI is 188.3, what is the par value of the TIPS?

Answer 1

par value of the TIPS is $1034.05

Explanation:

Given:

- original reference CPI = 182.1

- current CPI = 188.3

Assume face value of tips = $1000

par value of the TIPS =
`face\ value\ of\ tips* (current\ CPI)/(original\ reference\ CPI)`

par value of the TIPS =
`1000* (188.3)/(182.1)\approx $1034.05`