The coupon on a bond has been expressed in real terms, rather than as a nominal amount.

The coupon on a bond has been expressed in real terms, rather than as a nominal amount.

This is because:
A . It is an inflation-linked bond
B . Its redemption date is longer than 10 years
C . It is an unsecured instrument
D . It is a bearer bond

View Answer

Answer: A

Explanation:

Real vs. Nominal Terms:

Inflation-linked bonds adjust their coupon payments and principal based on inflation rates.

Expressing the coupon in real terms ensures it reflects purchasing power rather than face value.

Elimination of Other Options:

B: Redemption date length is unrelated to coupon expression.

C & D: Security type (unsecured/bearer) does not dictate coupon terms.

Reference: ICWIM Module 3: Explanation of bond types, including inflation-linked securities.