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Income Intermediate: Treasury Inflation-Adjusted Securities

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1.
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.
2.
If you earn interest on an inflation-adjusted bond, _______.
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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.
3.
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."
4.
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.
5.
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.