What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?
A) An inflation-indexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not.
B) A nonindexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not.
C) An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve,while a nonindexed Treasury can be purchased through a broker.
D) An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return,while a nonindexed Treasury bond does not.

Question

Quizplus · Accepted Answer

An inflation-indexed Treasury bond guarantees a certain real rate of return, while a nonindexed Treasury bond does not. Inflation-indexed Treasury bonds are designed to protect investors from inflation, as the principal amount and the interest payments received on these bonds are linked to the consumer price index (CPI). This means that the return on the bond will increase if there is inflation. On the other hand, nonindexed Treasury bonds have a fixed rate of return, which means they do not provide protection for inflation.

What Is the Difference Between an Inflation-Indexed Treasury Bond,and a Treasury