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Dan,

A bond bought 01/12/11 that is due 03/01/97 has a holding-period of 86.1 years. Therefore, it needs to be asked what par will be worth if inflation averages X% and what the income-stream is worth each year. (I chose 5% as an inflation-rate. But pick any number you want.) The answer, obviously, is "Not very much". There are a couple of ways to obtain a more specific answer. One is brute-force (aka, set up a spreadsheet and discount par and coupons year by year). The other is to approximate the impact of inflation by creating proprietary formulas.

E.g., if inflation averages 5%, buying a bond at 90 due in 86.1 years results in a an average capital-loss of -4.6% per year which is offset by an average gain from coupons of 1% per year, for a yearly net-loss of purchasing-power of -3.6%, as I stated. There is nothing wrong with my math.

The assumptions that underlie my formulas (which I leave to you to work out) are brutal. But they allow me to compare zeros to couponed bonds to tax-advantaged bonds and to determine closely enough, for 500 bonds at a time, the effect inflation will have on my purchasing-power. (The impact of taxes is a further matter.)

Charlie
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