A ________ is a standard coupon bond and its outstanding principal is adjusted for ________.

Question

Quizplus · Accepted Answer

A real return bond is a bond whose outstanding principal is adjusted for inflation. It is a type of inflation-indexed bond that provides protection against the erosion of purchasing power caused by inflation. Option B is incorrect because a discounted bond is a bond that is priced lower than its face value, and its outstanding principal is not adjusted for anything. Option C is incorrect because a strip bond is a bond that has been stripped of its coupon payments, and its outstanding principal is not adjusted for anything. Option D is incorrect because the yield to maturity is a measure of the total return anticipated on a bond, but it does not affect the outstanding principal of the bond.

A ________ Is a Standard Coupon Bond and Its Outstanding