If an Investor Purchases a 3%,5-Year TIPS at Its Par

question 50

Multiple Choice

If an investor purchases a 3%,5-year TIPS at its par value of $1,000 and the CPI increases 3% over each of the next 5 years,what will be the real value of the principal at maturity?

• A) $1,000.00
• B) $1,030.00
• C) $1,060.90
• D) $1,061.36

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Definitions:

Decompression Melting

A process where melting occurs due to a decrease in pressure as rock rises closer to the Earth's surface without a significant increase in temperature.

Subduction

The process by which one tectonic plate moves under another plate and is forced into the mantle.

Decompression Melting

The process by which melting occurs in the mantle due to a decrease in pressure as rocks ascend towards the surface.

Mantle-Derived Magmas

Magma that originates from the Earth's mantle, typically characterized by its composition which can influence the type of volcanic eruption.