Investment returns can be indexed by tying security payments to
A) changes in the nominal rate of interest.
B) changes in the price level.
C) the Treasury bill rate of interest.
D) the change in purchasing power risk.

Question

Quizplus · Accepted Answer

Tying investment returns to changes in the price level provides protection against inflation risk, which is not addressed by the other options. Changes in nominal interest rates and the Treasury bill rate do not necessarily reflect changes in purchasing power, and do not guarantee protection against inflation. The change in purchasing power risk is a vague term that does not provide a clear measure of investment returns.

Investment Returns Can Be Indexed by Tying Security Payments to