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1.
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. 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.
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False. Phantom income refers to taxable income on an inflation-adjusted bond's principal interest.
3.
The main advantage of inflation-adjusted securities is _______.
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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 _______.
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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.
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False. In periods of deflation, inflation-adjusted securities will decrease in value, but not below their par values.