SIE (Securities Industry Essentials) Practice Exam

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Which product is most exposed to inflationary risk?

Treasury bonds
Corporate stocks
Municipal bonds
Commodities

The correct answer is: Treasury bonds

Inflationary risk is the potential for rising inflation to affect the value of an investment. Treasury bonds are typically considered to be the most exposed to inflationary risk because the rate of return on these bonds is fixed, meaning that if inflation rises, the value of the bond decreases. In contrast, corporate stocks and municipal bonds may be able to adjust their returns to account for inflation, making them less exposed to inflationary risk. Commodities, while also affected by inflation, may have other factors that impact their value, making them less exposed to inflationary risk compared to Treasury bonds.