Tressury securities | Business & Finance homework help
The additional variable rate provided by TIPS bonds makes them more attractive to investors than traditional treasury notes under certain economic conditions; in this case with inflation remaining steady, Judy stands to benefit from receiving an extra 2% per annum compared to what she would receive from the treasury note. Furthermore these securities offer some protection against deflation as well; should prices suddenly fall Judy will still receive an above market rate for her investment.
Ultimately it all comes down to one’s individual circumstances and risk tolerance when deciding which option is best for them; however it can be argued that investing in TIPS can provide greater returns if inflation remains relatively stable or even falls while also providing some level of protection during periods of rising prices. Ultimately this type of security might be suitable for those looking for predictable returns over time with minimal risk exposure.