SIE practice questionmediumTIPS
Treasury Inflation-Protected Securities (TIPS) offer which unique feature?
- AMaturity extends beyond 30 years
- BInterest rates are determined by inflation expectations
- CPrincipal is adjusted based on changes in the Consumer Price Index (CPI)✓ Correct answer
- DExempt from both federal and state taxes
Explanation
Why C — Principal is adjusted based on changes in the Consumer Price Index (CPI)
TIPS adjust principal with CPI changes. Interest rate is fixed, maturities are up to 30 years, and only state taxes are exempted.
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