What Is the Difference Between an Inflation-Indexed Treasury Bond,and a Treasury

question 46

Multiple Choice

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

• A) An inflation-indexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not.
• B) A nonindexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not.
• C) An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve,while a nonindexed Treasury can be purchased through a broker.
• D) An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return,while a nonindexed Treasury bond does not.

---

Definitions:

Forecasting Risk

The possibility of error in projecting future values such as revenues, costs, or stock prices, due to uncertainty about future events.

Initial Investment

Refers to the initial capital outlay or amount of money invested to start a project or investment.

IRR

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Financial Break-Even

The point at which revenues equal expenses and neither profit nor loss is realized.