The US Treasury Issues Bonds Where the Return Is Indexed to to the Consumer

question 71

Multiple Choice

The U.S. Treasury issues bonds where the return is indexed to the consumer price index. We should expect that these bonds, relative to other U.S. Treasury bonds, will have:

• A) lower price and lower return due to the decreased risk.
• B) lower price and a lower fixed return since the demand for them should be higher.
• C) higher price and higher fixed return since we always seem to have some inflation.
• D) higher price and lower return due to the decreased risk from inflation in holding these bonds.

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Definitions:

Canadian History

The study of past events and developments within the geographical area of present-day Canada.

Recall

The mental process of retrieving and remembering information or experiences from the past.

Retroactive Interference

Retroactive interference is a memory phenomenon where newer information interferes with the recall of older information.

Proactive Interference

the cognitive phenomenon where older memories interfere with the recall of newer memories.