For index-linked bonds,which of the following changes in alignment with the CPI?

A) yield
B) holding period return
C) price
D) coupon rate

Question

For index-linked bonds,which of the following changes in alignment with the CPI?

A) yield
B) holding period return
C) price
D) coupon rate

Quizplus · Accepted Answer

CPI-linked bonds tend to be issued by government authorities,and work by giving protection against inflation to investors by providing a set level of real return.The most common form of these securities is the capital-indexed bonds.Each year,the redemption or face value of the bond is indexed upward by the rate of inflation.As coupons are paid on the face value of the bond,the coupons are similarly indexed upward.

For Index-Linked Bonds,which of the Following Changes in Alignment with the CPI