I suppose I need some help understanding TIPS.If I buy at Auction on Tuesday a $1000 TIP at a coupon rate of 2.125%then 6 months later they apply an inflation increase of say example 1/2 of 3% = 1.5% per year to the principal. So, $1000 plus 1.5% inflation = 1015 x ( 1/2 x 2.125%)= $1025.78For a return of 2.58% for the first 6 months or looking forward to one year about 5.2%.Assuming I have the basic math down , it appears the only upside to buying TIPS would be if inflation was to be 4% or better. Otherwise wouldn't CD's be just as good?
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