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The process of selling a bond's coupons and principal separately is called stripping.

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True

False

True. Stripping involves separating the two from each other.

The principal of an inflation-adjusted bond is always guaranteed to its investor.

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True

False

False. The principal of an inflation-adjusted bond is guaranteed by the full faith and credit of the US government if an investor holds onto it until its maturity.

Phantom income is taxable income on an inflation-adjusted bond's coupon interest.

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True

False

False. Phantom income refers to taxable income on an inflation-adjusted bond's principal interest.

Par value measures the effects of inflation.

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True

False

False. The CPI-U measures the effects of inflation.

A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.

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True

False

True. A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.

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