Inflation-Indexed Bond
An inflation-indexed bond is a debt security whose principal and interest payments adjust over time to reflect changes in a price index, such as the Consumer Price Index (CPI).
Example: A TIPS with par value 1,000 and a coupon rate of 1.5% pays interest based on the inflation-adjusted principal; if the CPI rises 2% over a year, the principal grows to 1,020 and the next coupon payment is 1.5% of 1,020.
💬 Comments