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Bonds 207: Treasury Inflation-Adjusted Securities

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1.
Only the principal of an inflation-adjusted bond is adjusted for inflation.
Choose wisely. There is only one correct answer.
False. Semi-annual interest payments (not the interest rate) will also adjust for inflation as the principal adjusts.
2.
Treasury inflation-adjusted securities come in maturities of five or 10 years.
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True. Maturities are for five or 10 years.
3.
If you earn interest on an inflation-adjusted bond, _______.
Choose wisely. There is only one correct answer.
The income is taxed as ordinary income by the IRS. If you earn interest on an inflation-adjusted bond, the income is taxed as ordinary income by the IRS.
4.
The principal of an inflation-adjusted bond is always guaranteed to its investor.
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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.
5.
The time when a bond pays you back your principal is called its _______.
Choose wisely. There is only one correct answer.
Maturity. The maturity is the date on which you get your principal back.