Income Intermediate: Treasury Inflation-Adjusted Securities

Test your knowledge

Choose wisely. There is only one correct answer to each question.

Keep studying!

Review your answers below to learn more.

The time when a bond pays you back your principal is called its _______.

Choose wisely. There is only one correct answer.

Par value

Maturity

CPI-U

Maturity. The maturity is the date on which you get your principal back.

The principal of an inflation-adjusted bond is always guaranteed to its investor.

Choose wisely. There is only one correct answer.

True

False

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.

Only the principal of an inflation-adjusted bond is adjusted for inflation.

Choose wisely. There is only one correct answer.

True

False

False. Semi-annual interest payments (not the interest rate) will also adjust for inflation as the principal adjusts.

If you earn interest on an inflation-adjusted bond, _______.

Choose wisely. There is only one correct answer.

The income is tax-deferred

The income is taxed as ordinary income by the IRS

You only have to pay tax on coupon interest, not principal interest

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.

The process of selling a bond's coupons and principal separately is called stripping.

Choose wisely. There is only one correct answer.

True

False

True. Stripping involves separating the two from each other.

© Copyright 2024 Precision Information, publisher of the Financial Fitness Group family of products. The trade name Financial Fitness Group and the trademarks Financial Fitness CENTER™, Financial Fitness CHECKUP™ and Financial Fitness ACADEMY™ are exclusive marks of Precision Information, LLC. All rights reserved.