Income Intermediate: Treasury Inflation-Adjusted Securities

Test your knowledge

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

0%
Keep studying!
Review your answers below to learn more.
1.
In periods of deflation, inflation-adjusted securities will increase in value.
Choose wisely. There is only one correct answer.
False. In periods of deflation, inflation-adjusted securities will decrease in value, but not below their par values.
2.
A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.
Choose wisely. There is only one correct answer.
True. A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.
3.
Phantom income is taxable income on an inflation-adjusted bond's coupon interest.
Choose wisely. There is only one correct answer.
False. Phantom income refers to taxable income on an inflation-adjusted bond's principal interest.
4.
Issuing inflation-adjusted securities reduces the interest costs of the US Treasury department.
Choose wisely. There is only one correct answer.
True. The Treasury department saves on interest costs in this way.
5.
Inflation is the continuous rise of prices over time.
Choose wisely. There is only one correct answer.
True. When we speak of the rising of prices, we call it "inflation."