QUESTIONS 97 THROUGH 108 RELATE TO FIXED INCOME INVESTMENTS.

106. On January 1 ^st of the year, an investor purchases $100,000 in par value of a new Treasury

Inflation Protection Security (TIPS) issue that has a 2.5% coupon rate. The annual rate of

inflation over the first six months of the year is 4.0% and the annual rate of inflation for

the second six months of the year is 3.0%. The amount of coupon interest paid to the

investor after the second six months of the year is closest to:

A. $1,275.

B. $1,294.

C. $1,339.