Income Intermediate: Treasury Inflation-Adjusted Securities

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Treasury inflation-adjusted securities come in maturities of five or 10 years.

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True

False

True. Maturities are for five or 10 years.

Par value measures the effects of inflation.

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True

False

False. The CPI-U measures the effects of inflation.

Issuing inflation-adjusted securities reduces the interest costs of the US Treasury department.

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True

False

True. The Treasury department saves on interest costs in this way.

You don't have to pay state income taxes on interest earned from Treasury inflation-adjusted securities.

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True

False

True. You are exempt from state income taxes on interest earned from Treasury inflation-adjusted securities.

A bond's principal will lose its purchasing power over time unless it is adjusted for inflation.

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True

False

True. That is why some bonds adjust their interest rates to stay ahead of inflation.

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