Debt (U.S. gov debt) SIE EXAM
A customer buys 5M of 6 1/4% Treasury Bonds at 100. How much interest income will the customer receive at each interest payment?
$156.25 "5M" means that 5-$1000 bonds are being purchased. Semi-annually 5000x.0625 = ... /2 =156.25
The minimum denomination for a mortgage backed pass through certificate is:
$25,000
A 5 year 3 1/2% Treasury Note is quoted at 101-4 - 101-8. The note pays interest on Jan 1st and Jul 1st. A customer buys 5M of the notes. How much will the customer pay, disregarding commissions and accrued interest?
$5062.50.
An investor buys a 3.25% Treasury Bond, paying interest on February 1st and August 1st, on Friday, May 18th, regular way settlement. How many days of accrued interest are due from buyer to seller? (This is not a leap year.)
109 days - feb 28 mar 31 April 30 and may 20 = 109
Which statements are TRUE about CMBs?
CMBs are sold at a discount to par, and are sold on an "as needed" basis
Which statement is FALSE about CMBs?
CMBs are sold at a regular weekly auction
Which of the following are TRUE statements regarding government agencies and their obligations?
Fannie Mae is a publicly traded company, and Fannie Mae debt securities are non-negotiable
Which of the following agencies issuing mortgage backed pass through certificates is (are) restricted to purchasing conventional mortgages that are not VA or FHA insured?
Freddie Mac
A customer wishes to buy a security that provides monthly payments for his retirement. Which of the following is suitable?
GNMA pass through certificates
Which statement is FALSE regarding Treasury Inflation Protection securities?
In periods of inflation, the principal amount received at maturity will be par
All of the following are true statements regarding Treasury Bills EXCEPT:
T-Bills are issued in bearer form in the United States
Which of the following statements are TRUE regarding Treasury Bills?
T-Bills are original issue discount obligations, auctioned off weekly by the Federal Reserve, when they mature, the different between the purchase price and the redemption price is taxable as interest income, and they are direct obligation of the U.S. government
Which investment does NOT have purchasing power risk?
TIPS, and treasury bills
All of the following are true statements about Treasury STRIPS EXCEPT:
These are suitable investments for individuals seeking current income and a high level of safety
A government securities dealer quotes a 3 month Treasury Bill at 5.00 Bid - 4.90 Ask. A customer who wishes to buy 1 Treasury Bill will pay:
a dollar price quoted to a 4.90 basis
Series EE bonds:
are issued at face value, and pay interest at redemption
Series EE bonds:
are non-negotiable, and pay interest at redemption
Treasury Receipts pay interest:
at maturity
New issues of Treasury Bonds, are issued by the U.S. Government in which form?
book entry
Treasury Notes are issued by the U.S. Government in:
book entry form, and minimum denominations of $100
The Federal Reserve would permit which of the following to be "primary" U.S. Government securities dealers?
commercial banks, domestic broker-dealers, and foreign broker-dealers
Which statements are TRUE regarding Government National Mortgage Association pass-through certificates?
dealers typically quote GNMA securities at 50 basis points over equivalent maturity U.S. government bonds, and credit risk for GNMAs is the same as for equivalent U.S government bonds
Trades of all of the following securities settle in Fed Funds EXCEPT:
general obligation bonds
Which of the following trades settle in "clearing house" funds?
general obligation bonds
Which is considered to be a direct obligation of the U.S. Government?
government national mortgage association pass through certificates (GNMA)
If Treasury bill yields are dropping at auction, this indicates that:
interest rates are falling, and treasury bill prices are rising
Which of the following characteristics of Fannie Mae and Ginnie Mae pass-through certificates are the same?
issued in $25,000 denominations, backed by FHA and VA insured mortgages, and holders receive monthly payments of combined interest and principal
The nominal interest rate on a TIPS is:
less than the rate on an equivalent maturity treasury bond
When interest rates rise, which of the following statements are TRUE?
longer maturity bond prices are affected more than shorter maturity bond prices, and T-Bond prices are affected more than T-Bill prices
Which statements are TRUE about the risks associated with federal agency securities?
market risk and virtually no credit risk
Which of the following would NOT purchase STRIPS?
money market fund, and individual seeking current income
Trades of U.S. Government bonds settle:
next business day in payment by Federal Funds
Which of the following statements about Treasury STRIPS are TRUE?
not suitable investments for individuals seeking current income, and are not subject to reinvestment risk
Which of the following statements are TRUE about the Government National Mortgage Association (GNMA)?
owner by the U.S. government, and pass through certificates are guaranteed by the U.S. government
A security which gives the holder an undivided interest in a pool of mortgages is known as a(n):
pass through certificate
Which of the following is the most likely purchaser of STRIPS?
pension fund
U.S. Treasury securities are generally considered to be immune to all of the following risks EXCEPT:
purchasing power risk
Which of the following risks are applicable to Ginnie Mae Pass Through Certificates?
purchasing power risk, risk of early prepayment of mortgages if interest rates fall, and risk of loss of principal if interest rates rise
The nominal interest rate on a TIPS approximates the:
real interest rate
Which statements are TRUE regarding Treasury debt instruments?
sold by competitive bidding at auction conducted by the Federal Reserve, and are issued in book entry form with no physical certificates issued
Which statements are TRUE regarding Treasury STRIPS?
the bonds are issued at a discount, and the interest income is accreted and taxed annually
Sallie Mae debentures are backed by:
the full faith and credit of the Student Loan Marketing Association
All of the following are true statements regarding both Treasury Bills and Treasury Receipts EXCEPT:
the maturity is 1 year or less
Treasury Bills cannot be used as the underlying collateral for Treasury Receipts because:
the maturity of a treasury bill is too short
Which of the following statements are TRUE about Treasury Receipts?
the underlying securities are backed by the full faith and credit of the U.S. government, the interest coupons are sold off separately from the principal portion of the obligation, the securities are purchased at a discount, the securities mature at par
Which statement is TRUE about the liquidity and risk associated with federal agency securities?
there is minimal marketability risk
Which of the following statements are TRUE for both government and agency securities?
they are exempt from registration under the Securities Act of 1933, they are interstate's bearing obligations quoted in 32nds, trades settle in Federal Funds, and they are eligible for trading in Federal Reserve open market operations
Which of the following statements are TRUE regarding the trading of government and agency bonds?
trading is performed by primary and secondary dealers, trading is performed by the Federal Reserve, and the trading market it active
All of the following trade "and interest" EXCEPT:
treasury bills
Which of the following are zero coupon original issue discount obligations?
treasury bills, and treasury STRIPS
Which of the following trade "flat" ?
treasury bills, treasury strips, and treasury receipts
All of the following investments give a rate of return that cannot be affected by "reinvestment risk" EXCEPT:
treasury bond
Which of the following does not trade "flat" ?
treasury bonds
Which of the following investments is issued with a stated coupon rate and with a maximum maturity of 30 years?
treasury bonds
If interest rates are rising rapidly, which U.S. Government debt prices would be MOST volatile?
treasury bonds - the longer the maturity the greater the price volatility
Which statements are always TRUE about Treasury Bonds?
treasury bonds are traded in 32nds, and have minimum maturity of more than 10 years
The physical securities which are the underlying collateral for Treasury Receipts can be which of the following?
treasury notes and treasury bonds
Which statements are TRUE when comparing Treasury Notes to Treasury Bills?
treasury notes have a longer initial maturity, and pay interest semi-annually
Which of the following investments gives a rate of return that cannot be affected by "reinvestment risk"?
treasury receipts
