|
The face amount
of a bond is called its principal or par value. The
principal is the amount you originally invest in the bond, which represents a
loan made to the organization issuing the bond. The face amount of a bond
is due to be repaid when it matures. If you hold your bond until it
matures, you get back your entire principal unless the bond defaults.
Treasury inflation-adjusted bonds are adjusted based on the
Consumer Price Index (CPI-U). The CPI-U measures the average change over
time in the prices urban consumers pay for a given "basket" of goods and
services. As prices continuously increase over time, the purchasing power
of the consumer's dollar declines. This is called inflation.
The CPI-U is the most widely used measure of inflation. The Bureau of
Labor Statistics of the U. S. Department of Labor publishes the CPI-U monthly.
|
