I Bonds versus TIPS: should individual investors prefer one to the other?
DOI:
https://doi.org/10.61190/fsr.v15i4.4864Keywords:
Personal income taxes, Options pricing, Investment decisions, Savings bondsAbstract
Both TIPS and Series I Bonds are adjusted for inflation, offering a real rate and an inflation adjustment. The inflation adjustment is the same on both securities, but the real portion of the interest rate on TIPS is generally much higher. Despite I Bonds' less attractive real rate, they have several features that add to their value. They may be redeemed before maturity, at par value plus accrued interest, eliminating price risk. In addition, taxes may be deferred until redemption. We estimate the value of these two features, and find that they are substantial and could potentially offset the lower real rate of I Bonds.
Downloads
Downloads
Published
Issue
Section
License
Copyright (c) 2006 Academy of Financial Services
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Author(s) retain the copyright and full publishing rights without restriction.
Author(s) grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows reusers to distribute, remix, adapt, and build upon the material in any medium or format, for noncommercial purposes only. Reusers must acknowledge the work's authorship and initial publication in this Journal.
Noncommercial means not primarily intended for or directed towards commercial advantage or monetary compensation.
In addition, FSR grants to the UGA Libraries a worldwide, non-exclusive license to all content published by the Journal, including metadata, that is necessary to publish, transmit, and index the Journal and to preserve its content over time.
