The USTreasury Has Introduced Bonds Where the Return Is Indexed to to the Consumer

question 121

Multiple Choice

The U.S.Treasury has introduced 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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