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Bonds 207: Treasury Inflation-Adjusted Securities

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1.
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.
2.
Only the principal of an inflation-adjusted bond is adjusted for inflation.
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False. Semi-annual interest payments (not the interest rate) will also adjust for inflation as the principal adjusts.
3.
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.
4.
Issuing inflation-adjusted securities reduces the interest costs of the US Treasury department.
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True. The Treasury department saves on interest costs in this way.
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.