A(n) ________ gives purchasers inflation protection.

Question

Quizplus · Accepted Answer

A floating rate bond adjusts its interest rate according to changes in an underlying interest rate benchmark, such as the LIBOR or the Fed Funds Rate, which provides inflation protection to the purchaser. As the benchmark rate increases, so does the interest rate paid by the issuer, and vice versa. This helps to mitigate inflation risk, making the floating rate bond a good choice for those seeking inflation protection. Zero-coupon bonds, junk bonds, and income bonds do not necessarily provide inflation protection.

A(n) ________ Gives Purchasers Inflation Protection