Treasury Inflation-Protected Securities (TIPS)
A) pay a fixed interest rate for life.
B) pay a variable interest rate that is indexed to inflation but maintain a constant principal.
C) provide a constant stream of income in real (inflation-adjusted) dollars.
D) have their principal adjusted in proportion to the Consumer Price Index.
E) provide a constant stream of income in real (inflation-adjusted) dollars and have their principal adjusted in proportion to the Consumer Price Index.

Question

Quizplus · Accepted Answer

TIPS provide a constant stream of income in real (inflation-adjusted) dollars because their principal is adjusted in proportion to the Consumer Price Index.