Income Intermediate: Treasury Inflation-Adjusted Securities

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

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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.

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.

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

False

True. A bond's reference CPI-U is actually the CPI from three months prior to the bond's issue date.

Phantom income is taxable income on an inflation-adjusted bond's coupon interest.

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True

False

False. Phantom income refers to taxable income on an inflation-adjusted bond's principal interest.

Inflation is the continuous rise of prices over time.

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True

False

True. When we speak of the rising of prices, we call it "inflation."

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