Final answer:
The correct answer is option 5. To ensure bond ownership increases purchasing power, an investor should consider Treasury Inflation-Protected Securities (TIPS), as they offer protection against inflation by adjusting their principal value based on the Consumer Price Index.
Step-by-step explanation:
An investor seeking to ensure that their bond ownership will increase purchasing power would be primarily concerned with protection against inflation. Treasury Inflation-Protected Securities (TIPS) are specifically designed to help protect investors from inflation. These securities adjust their principal value according to the changes in the Consumer Price Index (CPI), ensuring that the bond's return compensates for any rise in inflation. Therefore, receiving a rate of return that consists of a risk-free compensation for delaying consumption and an adjustment for inflationary pressure helps to retain the bond's purchasing power over time.
Comparatively, other investments such as OTC stocks, death bonds (also called life settlement bonds), CAT bonds (catastrophe bonds), and PETS (pet care stocks) do not have mechanisms built in to adjust for inflation and are not specifically designed with the primary goal of protecting against inflation. While investments like government saving bonds, IRAs, money market mutual funds, and small CDs are part of a diversified portfolio, they do not provide the explicit inflation protection offered by TIPS.
In conclusion, if an investor is primarily concerned about maintaining and/or increasing their purchasing power, purchasing TIPS would be the recommended option. Hence, the correct option for an investor concerned about increasing purchasing power through bond ownership is option 5) TIPS.