Which one of the following debt instruments guarantees investors a positive real rate of return?
A)zero coupon bond
B)default-free, pure discount bond
C)T-bill
D)TIPS
E)T-bond

Question

Quizplus · Accepted Answer

TIPS (Treasury Inflation-Protected Securities) guarantee investors a positive real rate of return because the interest payments and principal value of the bond are adjusted for inflation. This ensures that the investor's purchasing power is protected from inflation. The other choices may provide a positive nominal return, but they do not adjust for inflation and may not necessarily provide a positive real return.

Which One of the Following Debt Instruments Guarantees Investors a Positive