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TIPS Are Unlike Most Bonds in That Their Cash Flows

question 35

True/False

TIPS are unlike most bonds in that their cash flows increase when the national rate of gross domestic product increases.


Definitions:

Current Yield

The annual income (interest or dividends) divided by the current price of the security.

Times-Interest-Earned Ratio

A financial ratio that measures a company's ability to meet its debt obligations based on its current earnings before interest and taxes.

Bond-Rating Agencies

Organizations that assess the creditworthiness of both corporate and governmental issuers of debt securities, providing investors with an indication of the risk level of bonds.

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