Inflation-indexed Treasury securities: I.adjust the principal amount on an annual basis.
II)are default-free.
III)offer a positive real rate of return.
IV)have a variable coupon rate.
A) II and III only
B) III and IV only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV

Question

Quizplus · Accepted Answer

Inflation-indexed Treasury securities adjust their principal amount on an annual basis to account for inflation, which means that statement (I) is true. These securities are issued by the US government and are considered default-free, which means that statement (II) is also true. Inflation-indexed Treasury securities offer a positive real rate of return, which means that statement (III) is also true. However, these securities have a fixed coupon rate, which means that statement (IV) is false. Therefore, the best choice is option A, which includes only statements II and III.

Inflation-Indexed Treasury Securities: I