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Bonds 207: Treasury Inflation-Adjusted Securities

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1.
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.
2.
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.
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.
Inflation is the continuous rise of prices over time.
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True. When we speak of the rising of prices, we call it "inflation."
5.
The process of selling a bond's coupons and principal separately is called stripping.
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True. Stripping involves separating the two from each other.