Income Intermediate: Treasury Inflation-Adjusted Securities

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1.
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.
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.
You don't have to pay state income taxes on interest earned from Treasury inflation-adjusted securities.
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True. You are exempt from state income taxes on interest earned from Treasury inflation-adjusted securities.
4.
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.
5.
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."