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Bonds
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200
Bonds 207:
Treasury Inflation-Adjusted Securities
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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Review your answers below to learn more.
1.
A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.
Choose wisely. There is only one correct answer.
True
False
True. A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.
2.
Phantom income is taxable income on an inflation-adjusted bond's coupon interest.
Choose wisely. There is only one correct answer.
True
False
False. Phantom income refers to taxable income on an inflation-adjusted bond's principal interest.
3.
The main advantage of inflation-adjusted securities is _______.
Choose wisely. There is only one correct answer.
They will help you reduce your taxes
They offer an investment that maintains its purchasing power
They are not affected by interest rates
They offer an investment that maintains its purchasing power. They manage this by paying interest rates that stay ahead of inflation.
4.
The time when a bond pays you back your principal is called its _______.
Choose wisely. There is only one correct answer.
Par value
Maturity
CPI-U
Maturity. The maturity is the date on which you get your principal back.
5.
In periods of deflation, inflation-adjusted securities will increase in value.
Choose wisely. There is only one correct answer.
True
False
False. In periods of deflation, inflation-adjusted securities will decrease in value, but not below their par values.
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