SIE practice questionmediumTIPS
Treasury Inflation-Protected Securities (TIPS) adjust which component for inflation?
- ACredit rating
- BCoupon rate
- CMaturity date
- DPrincipal value✓ Correct answer
Explanation
Why D — Principal value
TIPS principal is adjusted for changes in the CPI, protecting against inflation. The coupon rate is fixed, but interest payments vary since they are based on the adjusted principal.
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