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1.
How do Treasury inflation-protected securities protect against inflation?
By adjusting the principal value as needed. TIPS will raise the principal in order to keep up with inflation. Since the interest rate remains the same, the actual amount paid will rise.
2.
Treasury inflation-protected securities are issued by _______.
The U.S. government. Because they are issued by Uncle Sam, they are considered very safe.
3.
How do bank loan funds' fees compare to the fees of the average bond fund?
They are higher. Compared to the average bond fund, their fees are higher.
4.
Bank loan funds have high _______ risk.
Credit. Because the loans come from lower-quality borrowers, the credit risk is elevated.
5.
Why might high-yield bond funds suffer greatly in an economic slowdown?
Their issuers might not be able to pay interest or principal. The bonds these funds own pay high yields because there is risk that the companies backing them won't be able to meet their obligations. Such defaults are most likely to crop up in a tougher economic environment.
