The principal value of TIPS is increased or decreased and is based on the measure of __________?
Correct answer: A. consumer price index
- A. consumer price index
- B. manufacturing price index
- C. auction selling index
- D. inflation payment index
Explanation
Treasury Inflation-Protected Securities adjust their principal according to changes in the Consumer Price Index. Interest payments also change because they are calculated on the adjusted principal.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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