Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Useful Information

Financial Accounting

1. Introduction to Accounting

Useful Information

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Multiple Choice

Which one of the following best describes a Treasury Inflation-Protected Security (TIPS)?

A U.S. government bond that pays interest only at maturity.

A corporate bond that pays a fixed interest rate regardless of inflation.

A U.S. government bond whose principal increases with inflation and pays interest based on the adjusted principal.

A municipal bond that is exempt from federal income tax.

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Verified step by step guidance

Understand the concept of Treasury Inflation-Protected Securities (TIPS): TIPS are a type of U.S. government bond designed to protect investors from inflation. The principal value of the bond is adjusted based on changes in the Consumer Price Index (CPI), which measures inflation.

Recognize how TIPS work: The principal amount of the bond increases with inflation, and the interest payments are calculated based on the adjusted principal. This ensures that both the principal and interest payments keep pace with inflation.

Compare TIPS to other types of bonds: Unlike corporate bonds that pay a fixed interest rate or municipal bonds that may be tax-exempt, TIPS specifically address inflation by adjusting the principal value. This makes them unique among bond types.

Eliminate incorrect options: A bond that pays interest only at maturity or a corporate bond with a fixed interest rate does not describe TIPS. Similarly, municipal bonds are not related to inflation adjustments.

Select the correct description: The correct answer is 'A U.S. government bond whose principal increases with inflation and pays interest based on the adjusted principal,' as this accurately describes the mechanism of TIPS.