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1.
A bond's principal will lose its purchasing power over time unless it is adjusted for inflation.
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True. That is why some bonds adjust their interest rates to stay ahead of inflation.
2.
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.
3.
Treasury inflation-adjusted securities come in maturities of five or 10 years.
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True. Maturities are for five or 10 years.
4.
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.
5.
Par value measures the effects of inflation.
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False. The CPI-U measures the effects of inflation.