This morning,you purchased a TIPS.Which one of these should you expect to occur if you hold this bond during an inflationary period?
A) The coupon payment will increase in real terms.
B) The maturity value will increase in nominal terms.
C) The market price will remain constant at par.
D) The market price will decrease.

Question

Quizplus · Accepted Answer

TIPS (Treasury Inflation-Protected Securities) are designed to protect against inflation. During an inflationary period, the principal value of TIPS increases with inflation, which in turn increases the maturity value in nominal terms.

This Morning,you Purchased a TIPS