Which of the following features (if any) of debt securities provides the investor with a measure of protection against inflation?
A) sinking fund
B) call feature
C) floating coupon rates
D) poison put covenant

Question

Quizplus · Accepted Answer

Floating coupon rates provide investors with protection against inflation because the coupon rate is adjusted periodically based on changes in a benchmark interest rate, such as the Consumer Price Index (CPI). As the benchmark rate rises with inflation, the coupon rate on the debt security also rises, providing investors with an increased yield to offset the effects of inflation. Sinking fund, call features, and poison put covenants do not provide protection against inflation.

Which of the Following Features (If Any) of Debt Securities