QUIZ SS8 - Asset Allocation Inflation / Deflation principal, correct, fixed

brain_wash_your

Pick the correct statement:

a) For Nominal floating coupon bonds, principal is deflation unprotected and coupon is inflation protected
b) For Nominal fixed coupon bonds, coupon is deflation protected and principal is inflation protected
c) For TIPS, coupon is defalation unprotected and principal is inflation protected

bodhisattva

I'd say c if I didn't know better

lcai

c is also the best I can get.

Don't know much about TIPS. Is TIPS coupon always fixed?

Valores

A - Principal IS deflation protected, so false
B - Principal is NOT inflation protected, so false
C - Correct

lcw77

mik , in B did you mean coupon is not deflation protected ? you wrote different

mp3bu

arent you both right?

pennyless

yes it is where can you find it in the cfa material?

Chuckrox

deriv108 Wrote:
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> c is also the best I can get.
>
> Don't know much about TIPS. Is TIPS coupon always
> fixed?


C is correct.

Par value of TIPS rises with inflation, as measured by CPI, while their interest rate remains fixed

bodhisattva

pimpineasy Wrote:
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> yes it is where can you find it in the cfa
> material?

Just reread it today in CFAI Text, book 3, page 243. Page 242 is also good too.

ohai

Thanks for these!