If inflation is higher than that expected at time of issue, inflation-indexed Treasury securities:
A)provide a lower return than fixed-income securities.
B)provide a higher return than fixed-income securities.
C)do not adequately compensate the investor for loss of purchasing power.
D)may be called in by the government.

Question

Quizplus · Accepted Answer

The investor receives two forms of return as a result of owning the security. The first is annual interest that is paid out semiannually, and the second is an automatic increase in the initial value of principal to account for inflation.

If Inflation Is Higher Than That Expected at Time of Issue