| At Purchase | One Year Later | Two Years Later | ||
|---|---|---|---|---|
| Date | 1/1/2022 | 1/1/2023 | 1/1/2024 | |
| Maturity Date | 1/1/2027 | 1/1/2027 | 1/1/2027 | |
| Coupon Rate | 1.5% | 1.5% | 1.5% | |
| Inflation | - | 3% | 3% | Inflation continues to rise 3& per year until the bond matures |
| Adjusted Principal | - | $1,030 | $1,061 | |
| Annual Coupon Payments | - | $15.45 | $15.91 | |
| Principal Repaid at Maturity |
Disclosure Title
Source: Schwab Center for Financial Research.
Disclosure
The initial hypothetical TIPS principal value is $1,000. For simplicity, this examples shows an annual inflation adjustment for the principal value, although in reality the adjustment occurs twice a year. The annual coupon payment equals the fixed coupon rate multiplied by the adjusted principal value. Example is hypothetical, for illustrative purposes only.