Which of the following will not happen for an investor who owns TIPS during a period of inflation?
A) The coupon payment will increase in real terms.
B) The maturity value will increase in nominal terms.
C) The investor's real rate of return is guaranteed.
D) Payments will increase depending on the level of the CPI.

Question

Quizplus · Accepted Answer

The coupon payment of TIPS increases with inflation, but in nominal terms, not real terms. The real rate of return is protected against inflation, but the real value of the coupon does not increase.

Which of the Following Will Not Happen for an Investor