Investors can lock in a real interest rate and thus avoid most of the risk of unexpected inflation by buying
A)corporate bonds.
B)inflation-indexed securities.
C)stock.
D)mortgage-backed securities.

Question

Quizplus · Accepted Answer

Inflation-indexed securities, also known as TIPS (Treasury Inflation-Protected Securities), are designed to provide investors with a real rate of return by adjusting the principal of the security for inflation. This means that as the Consumer Price Index (CPI) rises, the principal of the security increases, and the interest payments on the security also increase. Therefore, investors can lock in a real interest rate and avoid the risk of unexpected inflation.

Investors Can Lock in a Real Interest Rate and Thus