SIE practice questionmediumTreasury Securities - TIPS
Treasury Inflation-Protected Securities (TIPS) offer which of the following benefits?
- AState and local tax exemptions
- BHigher yields than corporate bonds
- CProtection against inflation through principal adjustments✓ Correct answer
- DNo federal income tax on interest
Explanation
Why C — Protection against inflation through principal adjustments
TIPS adjust principal for inflation. They usually yield less than corporates, are not exempt from state/local tax, and interest is federally taxable.
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