In an inflationary environment, the interest payments on Treasury inflation-indexed obligations increase over time.

Question

Quizplus · Accepted Answer

Treasury inflation-indexed obligations, such as TIPS (Treasury Inflation-Protected Securities), are designed to increase their principal in line with inflation, which in turn increases the interest payments over time since the interest rate is applied to the adjusted principal.

In an Inflationary Environment, the Interest Payments on Treasury Inflation-Indexed