SIE practice questionmediumInflation/purchasing power risk
Which portfolio is most vulnerable to inflation risk?
- AA portfolio of floating-rate bonds
- BA portfolio of TIPS (Treasury Inflation Protected Securities)
- CA portfolio of long-term fixed-rate bonds✓ Correct answer
- DA portfolio of growth stocks
Explanation
Why C — A portfolio of long-term fixed-rate bonds
Long-term fixed-rate bonds have fixed payments, so inflation erodes purchasing power. TIPS adjust for inflation, floating-rate bonds can reset, and growth stocks may hedge inflation.
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