SIE practice questionhardTIPS
Which is a unique feature of Treasury Inflation-Protected Securities (TIPS)?
- AThey are not backed by the U.S. government.
- BThey are always issued at a discount.
- CInterest is paid only at maturity.
- DThe principal value is adjusted for inflation based on the Consumer Price Index.✓ Correct answer
Explanation
Why D — The principal value is adjusted for inflation based on the Consumer Price Index.
TIPS have principal adjusted for inflation using CPI. They can be issued at par or premium. Interest is paid semiannually. They ARE backed by the U.S. government.
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