SIE practice questioneasyTIPS
The principal value of a TIPS bond:
- AIs adjusted based on changes in the Consumer Price Index (CPI)✓ Correct answer
- BNever changes during the bond's life
- CIs fixed at issuance and not adjusted
- DIs guaranteed to stay above par value
Explanation
Why A — Is adjusted based on changes in the Consumer Price Index (CPI)
TIPS (Treasury Inflation-Protected Securities) adjust principal for CPI changes. The principal can rise or fall with inflation, unlike fixed principal bonds.
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