Al is retire and enjoys his daily life. His one concern is that his bonds provid

Question

Al is retire and enjoys his daily life. His one concern is that his bonds provide a steady steam of income that will continue to allow him to have the money he desires to continue his active lifestyle without lowering his present standard of living. Although he has sufficient principal to live on, he only wants to spend the interest income provided by his holdings and thus is concerned about the purchasing power of that income. Which one of the following bonds should best ease Al's concerns?

6-year, putable, high coupon bond

5-year TIPS

10-year AAA coupon bond

5-year municipal bond

6-year, putable, high coupon bond

5-year TIPS

10-year AAA coupon bond

5-year municipal bond

Explanation / Answer

B) 5-year TIPS

As these bonds are adjusted to inflation

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