SIE practice questionmediumTreasury Securities - TIPS
The principal value of a Treasury Inflation-Protected Security (TIPS):
- ARemains constant regardless of inflation
- BDecreases if inflation rises
- CIs adjusted periodically based on the Consumer Price Index (CPI)✓ Correct answer
- DIs adjusted based on interest rates
Explanation
Why C — Is adjusted periodically based on the Consumer Price Index (CPI)
TIPS principals adjust in line with changes in the CPI, protecting against inflation. They do not remain constant or respond to interest rates.
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