Combined Debt Quiz Municipal Securities Series 52
140 Basis points equal: A. 1.4% B. 14% C. 140% D. 1400%
A
A bond contract contains the following information: Issue Date: July 1, 2005 First Call Date: July 1, 2015 Date of Call Price 2015 105 2016 104 2017 103 2018 102 2019 and after 100 If the issuer calls the bonds at 104 in the year 2016, the issuer is making a(n): A. optional call B. extraordinary optional call C. mandatory call D. extraordinary mandatory call
A
A customer would ask for a bond appraisal when selling a municipal bond: I because there is little or no active trading market for municipal bonds II because there is an active trading market for municipal bonds III to obtain an indication of the likely market price of the bond IV to obtain a firm bid on the bonds A. I and III B. I and IV C. II and III D. II and IV
A
A municipal bond dealer buys 100M of 30 year non-callable 9% General Obligation bonds at par less 1 point. After holding the bonds in inventory for a week, the dealer reoffers the bonds on a 9.10 basis. The dealer's approximate profit or loss on this transaction is: A. loss of $100 B. loss of $1,000 C. gain of $300 D. gain of $3,000
A
A municipal dealer gives another municipal dealer a firm offer, good for 1 hour. This means that: I The dealer making the offer has agreed not to change the price for 1 hour II The dealer receiving the offer has agreed not to change the price for 1 hour III The dealer making the offer has agreed not to sell the bonds to someone else at the quoted price for 1 hour IV The dealer receiving the offer has agreed not to buy the bonds from someone else at the quoted price for 1 hour A. I and III B. I and IV C. II and III D. II and IV
A
A municipality has a tax rate of 9 mills. A piece of real property in the municipality is assessed at $150,000 and has a fair market value of $155,000. The annual tax liability on the property is: A. $1,350 B. $1,395 C. $13,350 D. $13,950
A
For bonds trading at a discount, rank the yield measures from lowest to highest? I Nominal II Current III Basis A. I, II, III B. III, II, I C. II, I, III D. I, III, II
A
For bonds trading at a discount, rank the yield measures from lowest to highest? I Nominal II Current III Basis IV Yield to Call Basis A. I, II, III, IV B. IV, III, II, I C. II, I, III, IV D. I, III, II, IV
A
In 2013, a customer buys 1 PDQ 10%, $1,000 par debenture, M '28, at 115. The interest payment dates are Jan 1st and Jul 1st. The yield to maturity on the bond is: A. 8.37% B. 8.69% C. 10.00% D. 10.23%
A
Interest earned on corporate bonds is: I Subject to Federal tax II Subject to State and Local tax III Exempt from Federal tax IV Exempt from State and Local tax A. I and II B. III and IV C. I and IV D. II and III
A
Interest on a corporate bond accrues on a: A. 30/360 basis B. 30/actual basis C. actual/360 basis D. actual/actual basis
A
Municipal bond traders execute transactions in all of the following ways EXCEPT: A. on the floor of recognized exchanges B. with bank dealers in the over-the-counter market C. with brokerage wire houses in the over-the-counter market D. with municipal broker's brokers
A
New issues of municipal short term notes are available in which form? A. Book entry B. Bearer C. Fully registered D. Registered to principal and interest
A
The formula for a municipality's collection ratio is: A. taxes collected / taxes assessed B. taxes assessed / taxes collected C. taxes assessed * taxes collected D. (taxes collected + assessed property values) / taxes assessed
A
The interest income earned on which of the following municipal bonds would be included in the alternative minimum tax computation I Industrial Revenue Bond II Convention Center Bond III Turnpike Revenue Bond IV School District Bond A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV
A
The reserve maintenance fund consists of: A. monies to pay for extraordinary maintenance or replacement costs B. monies to pay for regularly scheduled major repairs and replacement costs C. monies to meet debt service requirements D. all gross revenues from the facility
A
To smooth out cash flow, a municipality will issue all of the following EXCEPT: A. BAN B. RAN C. TAN D. TRAN
A
Variable rate municipal notes avoid which of the following risks? A. market risk B. default risk C. marketability risk D. credit risk
A
When comparing an ETN to a structured product, which statements are TRUE? I ETNs can be traded at any time while structured products cannot II Structured products can be traded at any time while ETNs cannot III ETN income is taxable at lower rates than income from structured products IV Structured product income is taxable at lower rates than income from ETNs A. I and III B. I and IV C. II and III D. II and IV
A
Which of the following statements regarding collateralized mortgage obligations are true? I Each tranch has a different level of market risk II Each tranch has the same level of market risk III Each tranch has a different yield IV Each tranch has the same yield A. I and III B. I and IV C. II and III D. II and IV
A
Wide swings in market interest rates would affect which of the following for holders of collateralized mortgage obligations? I Prepayment Rate II Interest Rate III Market Value IV Credit Rating A. I and III B. II and IV C. I, II, III D. I, II, III, IV
A
"LIBOR" is the commonly used term for the: A. Long Term Bond Offered Rate B. London Interbank Offered Rate C. Last-In, Best Offered Rate D. Lowest Interest Borrowing Offered Rate
B
A "calamity call" is a(n): A. mandatory call B. extraordinary mandatory call C. optional call D. extraordinary optional call
B
A 15 year 3 1/4% Treasury Bond is quoted at 100-12 - 100-16. The bond pays interest on Jan 1st and Jul 1st. A customer sells 5M of the bonds. Approximately how much will the customer receive, disregarding commissions and accrued interest? A. $5,006.00 B. $5,018.75 C. $5,025.00 D. $5,028.75
B
A customer bought a $1,000 par convertible subordinated debenture at par, convertible into common at $25 per share. If the bond's market price increases by 20%, the parity price of the stock will be: A. 25 B. 30 C. 40 D. 48
B
A customer buys 5M of 4 1/4% Treasury Bonds at 99.12 The current yield of the Treasury Bond is: A. 4.25% B. 4.28% C. 4.60% D. 4.88%
B
A customer has an objective of maximizing current income. Under which conditions would you recommend that the customer sell long term debt positions and buy short term obligations? A. The yield curve is normal B. The yield curve is inverted C. The yield curve is hump shaped D. The yield curve is ascending
B
A customer purchases 8M of City of Los Angeles 4% G.O.'s, maturing in 2038 at 95. The interest payment dates are Jan 1st and Jul 1st. The trade took place on Tuesday, Feb 1st. How much will the customer pay for the bonds, excluding commissions and accrued interest? A. $6,000 B. $7,600 C. $8,000 D. $9,500
B
A customer residing in Connecticut that is in the 20% Federal tax bracket and the 5% State tax bracket wishes to make a bond investment with a minimum 10-year life. The customer also wants a high level of safety. The following 10-year bonds are available: Yield AAA Corporate Bond 5.50 U.S. Treasury Bond 4.00 AAA Federal Home Loan Bank Bond 4.50 AAA Connecticut Bond 3.50 The best recommendation for the customer is the: A. U.S. Treasury bond B. AAA Corporate bond C. AAA Connecticut bond D. AAA Federal Home Loan Bank bond
B
A municipality has floated a $200,000,000 revenue bond issue. The annual level debt service requirement is $5,000,000. In the first fiscal year, the municipality has collected revenues of $8,000,000. The "Coverage Ratio" is: A. $200,000,000 / $5,000,000 B. $8,000,000 / $5,000,000 C. $5,000,000 / $8,000,000 D. $13,000,000 / $200,000,000
B
All of the following agencies may issue securities EXCEPT: A. TVA B. FRB C. FHLMC D. FHLB
B
An investor buys a bond at a premium. Later in the year, the bond is trading at a discount. This is termed: A. Amortization B. Depreciation C. Accretion D. Devaluation
B
If the Federal Reserve enters into reverse repurchase agreements with member banks: I the Federal Reserve is tightening credit availability II the Federal Reserve is loosening credit availability III the Federal Funds rate is likely to go down IV the Federal Funds rate is likely to go up A. I and III B. I and IV C. II and III D. II and IV
B
In a corporate liquidation, the first to get paid is: A. Unpaid wages and taxes B. Secured bondholders C. Preferred stockholders D. Unsecured bondholders
B
Most of the value of a bond is established by the: A. present value of the first payment B. present value of the last payment C. expected volatility of the bond's price D. expected volatility of market interest rates
B
Regarding auction rate securities, a failed auction will result if the: I total par amount of sell orders received by the auction agent exceeds the total par amount of bids II total par amount of buy orders received by the auction agent exceeds the total par amount of offers III bid rates are lower than the Clearing Rate set for the auction IV bid rates are higher than the Clearing Rate set for the auction A. I and III B. I and IV C. II and III D. II and IV
B
Regarding bonds with put options, which of the following are true? I Exercise of the put is at the option of the bondholder II Once the option is exercisable, the bond's price will not fall below the option price if interest rates rise III Yields on bonds with put options are higher than similar bonds without this feature A. I only B. I and II C. II and III D. I, II, III
B
The bondholder of a municipal bond issue is the: A. borrower of the bond proceeds B. lender of the bond proceeds C. guarantor of the payment of debt service on the bond issue D. fiduciary acting for the benefit of the bondholders
B
The highest speculative grade rating is: A. BBB B. BB C. B D. CCC
B
The manager of a pension plan would most likely invest in which of the following debt issues? I Corporate Bonds II Municipal Bonds III Government Bonds A. I only B. I and III only C. II and III only D. I, II, III
B
The principal advantage of purchasing a variable rate municipal note is: A. The interest rate can be expected to remain fairly stable B. The market value can be expected to remain fairly stable C. The marketability risk can be expected to be lower D. The credit risk can be expected to be lower
B
The principal difference between a structured product and an ETN is: A. investment time horizon B. liquidity risk C. credit risk D. reference index
B
The risk that inflation will lower the present value of bond interest and principal repayments is: A. Credit Risk B. Purchasing Power Risk C. Legislative Risk D. Interest Rate Risk
B
To smooth out tax collections, a municipality will issue a? A. BAN B. TAN C. RAN D. TRAN
B
Under a municipal revenue bond rate covenant, charges for the use of a facility must be set at a level sufficient to cover: I Operation and maintenance of the facility II Debt service and mandatory deposits to the debt service reserve fund III Optional sinking fund deposits IV Deposits to the reserve maintenance fund A. I only B. I and II C. III and IV D. II and III
B
When a recession is expected: I yields on corporate bonds will increase II yields on U.S. Government bonds will increase III yields on corporate bonds will decrease IV yields on U.S. Government bonds will decrease A. I and III B. I and IV C. II and III D. II and IV
B
Which of the following bond issues would most likely have a mandatory sinking fund? A. Treasury Bond B. Hospital Revenue Bond C. State General Obligation Bond D. Double Barreled Bond
B
Which of the following bonds trades "flat" ? A. Unsecured bonds B. Income bonds C. Reset bonds D. Mortgage bonds
B
Which of the following statements are true about the activities of municipal securities brokers' brokers? I The use of municipal brokers' brokers allows financial institutions to maintain anonymity when buying or selling municipal securities II Any quotes offered by municipal brokers' brokers must be "bona-fide" III Municipal brokers' brokers are required to disseminate their bids and offers through Bloomberg IV Fees charged by municipal broker's brokers are established by the Municipal Securities Rulemaking Board A. I only B. I and II C. III and IV D. I, II, III, IV
B
Which statement is true about the activities of Sallie Mae? A. Sallie Mae makes direct loans to eligible students B. Sallie Mae buys student loans from originating financial institutions C. Sallie Mae buys conventional mortgages from originating financial institutions D. Sallie Mae buys VA and FHA insured mortgages from originating financial institutions
B
Which statements are true about CMO Targeted Amortization Class (TAC) tranches? I TAC tranches protect against prepayment risk II TAC tranches do not protect against prepayment risk III TAC tranches protect against extension risk IV TAC tranches do not protect against extension risk A. I and III B. I and IV C. II and III D. II and IV
B
Yield quotes for collateralized mortgage obligations are based upon: A. average life of the tranch B. expected life of the tranch C. 15 year standard life D. actual maturity of the underlying mortgages
B
A 30 year bond is issued in 2013 with the following call schedule: Redemption Date Redemption Price 2033 104 2034 103 2035 102 2036 101 2037 100 and after This issue has how many years of "call protection"? A. 10 B. 15 C. 20 D. 25
C
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? A. $5,056.25 B. $5,070.00 C. $5,062.50 D. $5,090.00
C
A declining rate of inflation would lead to: I lower bond prices II higher bond prices III lower bond yields IV higher bond yields A. I and III B. I and IV C. II and III D. II and IV
C
A mortgage backed security's "PSA" stands for: A. Pass-through standardization assumption B. Projected standardized amortization C. Prepayment speed assumption D. Principal securitization amount
C
A municipal bond portfolio shows the following: 25M, New York State 5% General Obligation bonds, M '10, rated A1 15M, New York City 8% General Obligation bonds, M '19, rated BBB+ 40M, Syracuse N.Y., 9% Housing Revenue bonds, M '15, rated AA- 20M, New York Port Authority 8% Revenue bonds, M '24, rated AAA This portfolio is diversified as to all of the following EXCEPT: A. issuer B. credit quality C. geography D. maturity
C
All of the following are true statements regarding revenue bonds EXCEPT: A. Issuance of the bonds is dependent on earnings requirements B. The bonds may be double barreled with backing by ad valorem taxes C. Revenue bonds are only suitable for investors willing to assume a high level of risk D. Yields for revenue bond issues are generally higher than yields for comparable G.O. issues
C
All of the following securities are quoted on a yield basis EXCEPT: A. Commercial Paper B. Treasury Bills C. American Depositary Receipts D. Banker's Acceptances
C
Construction Loan Notes are repaid from: A. rents received from the housing project built with the proceeds of the offering B. rent subsidies received from the U.S. Government C. monies received from a permanent take-out financing D. monies received from the issuance of the Construction Loan Note
C
Exchange rate risk is a factor to consider when investing in foreign debt issues and the: I U.S. dollar depreciates in value II U.S. dollar appreciates in value III foreign currency depreciates in value IV foreign currency appreciates in value A. I and III B. I and IV C. II and III D. II and IV
C
Ford Motor Company has issued 8% convertible debentures, convertible at a 25:1 ratio. Currently the debenture is trading at 110. The stock is trading at 38. What is the conversion price of the stock? A. 25 B. 38 C. 40 D. 44
C
General obligation bond analysis would consider all of the following EXCEPT: A. Record of tax collections B. Ratio of total debt per capita C. Protective covenants in the trust indenture D. Trend of assessed valuation of property
C
If a corporation reports a loss for a year, it is obligated to make interest payments on which of the following bonds? I Income bonds II Equipment trust certificates III Non-callable bonds IV Non-convertible bonds A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV
C
In a period of falling interest rates, a bond dealer would engage in which of the following activities? I Raise prices in interdealer quote publications such as Bloomberg for municipal bonds II Place "request for bids" in services such as Bloomberg on appreciated positions where the dealer has no current interest III Bid for bonds to cover previously established short positions IV Buy put options on debt instruments to hedge existing short positions A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV
C
Municipal brokers' brokers deal with which of the following? I Institutions II Bank dealers III Municipal bond dealers IV Individuals A. I and IV only B. II and III only C. I, II, III D. I, II, III, IV
C
Municipalities will issue which of the following to "pull forward" funds that will be collected as taxes in later months? A. BAN B. RAN C. TAN D. CLN
C
Net Direct Debt and Overlapping Debt equals: A. Debt per Capita B. Debt to Assessed Valuation C. Net Overall Debt D. Overlapping Debt
C
Revenue bonds may be called for which of the following reasons? I Homeowners have prepaid their mortgages II Interest rates have fallen III The issuer has reached a statutory debt limit IV The facility has been destroyed by fire A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV
C
Serial bonds are quoted on a: A. current yield basis B. discount yield basis C. yield to maturity basis D. nominal yield basis
C
The ratio of net direct debt plus overlapping debt to assessed valuation of property is used to: I analyze general obligation bonds II evaluate the issuer's creditworthiness III evaluate the issuer's overall ability to service its debt burden IV evaluate the issuer's ability to collect taxes owed A. I only B. III and IV only C. I, II, III D. I, II, III, IV
C
The term "Funded Debt" refers to: I Short term debt II Long term debt III Corporate debt IV U.S. Government debt A. I and III B. I and IV C. II and III D. II and IV
C
Treasury Bills, Bonds, and Notes Date Rate Bid Ask Yield Jan 21 3 5/8 98 - 27 98 - 31 3.67 Feb 21 3 1/2 94 - 14 95 3.68 Feb 25 3 7/8 95 - 01 95 - 06 4.07 Feb 27 4 3/4 119 - 07 119 - 13 3.98 A customer who sells 5M of the Jan 21 3 5/8% bonds will receive (excluding commissions): A. $4,913.50 B. $4,915.50 C. $4,942.19 D. $4,948.44
C
Treasury Receipts: I pay interest semi-annually II pay interest at maturity III are essentially zero coupon T-Notes or T-Bonds IV are essentially zero coupon T-Bills A. I and III B. I and IV C. II and III D. II and IV
C
Under the terms of a municipal revenue bond trust indenture, any funds that are appropriated for additions and improvements are deposited to a(n): A. sinking fund B. escrow fund C. renewal and replacement fund D. reserve maintenance fund
C
What source of information provides dealer offerings of municipal bonds in the secondary market? A. Munifacts B. EMMA C. Bloomberg D. The Bond Buyer
C
Which CMO tranch will be offered at the lowest yield? A. Plain vanilla B. Targeted amortization class C. Planned amortization class D. Companion
C
Which are true statements regarding government agencies and their obligations? I Fannie Mae is a publicly traded company II Ginnie Mae obligations trade at lower yields than Fannie Mae obligations III Federal agency obligations have the direct backing of the U.S. Government IV Ginnie Mae securities are directly backed by the U.S. Government A. I only B. II and IV only C. I, II, IV D. I, II, III, IV
C
Which of the following affect the marketability of corporate bonds? I Bond rating II Maturity III Block size IV Bond denominations A. I only B. II only C. I, II, III D. II, III, IV
C
Which of the following are true statements about discount bonds? I Discount bonds will appreciate more rapidly as interest rates fall than will similar premium bonds II A bond trading at a discount can indicate that market interest rates have risen III A bond trading at a discount can indicate that the issuer's credit rating has deteriorated IV Bonds trading at a discount are more likely to be called than bonds trading at a premium A. I and IV only B. II and IV only C. I, II, III D. I, II, III, IV
C
Which of the following ratings applies to commercial paper? I MIG 1 II P1 III P3 IV NP A. I and IV only B. II and III only C. II, III, IV D. I, II, III, IV
C
Which of the following statements are true about municipal dollar bonds? I Dollar bonds are traded in the secondary market II Dollar bonds are quoted on a yield to maturity basis III Dollar bonds are usually term issues IV Dollar bonds can be a component of a large combination serial and term municipal offering A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV
C
Which of the following statements are true regarding equipment trust certificates ("ETC"s)? I Equipment trust certificates are issued in serial maturities II Equipment trust certificates are secured by specified corporate assets III Default of ETCs is common during recessionary periods IV Equipment trust certificates are commonly issued by transportation companies A. I and III only B. II and IV only C. I, II, and IV D. I, II, III, IV
C
Which of the following statements regarding collateralized mortgage obligations are true? I Each tranch has a different level of market risk II Each tranch has a different level of credit risk III Each tranch has a different yield IV Each tranch has a different expected maturity A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV
C
Which of the following would be a quote for a manufacturing company bond? A. 99.50 B. 99-16 C. 99 1/2 D. 99 8/16
C
Which statement is FALSE regarding Treasury Inflation Protection securities? A. In periods of inflation, the coupon rate remains unchanged B. In periods of inflation, the amount of each interest payment will increase C. In periods of inflation, the principal amount received at maturity will be par D. In periods of inflation, the principal amount received at maturity is more than par
C
All of the following are evaluated in the feasibility study prepared prior to the issuance of revenue bonds EXCEPT: A. Expected demand for the facility B. Effect of competing facilities C. Expected operating costs of the facility D. Bond trust indenture
D
All of the following would be purchasers of Eurodollar bonds EXCEPT: A. British investors B. French investors C. Japanese investors D. United States investors
D
An ETN does NOT have which risk? A. Market risk B. Credit risk C. Marketability risk D. Reinvestment risk
D
Commercial paper can be issued for all of the following maturities EXCEPT: A. 14 days B. 30 days C. 90 days D. 360 days
D
In 2013, a customer buys 1 GE 8%, $1,000 par debenture, M '28, at 85. The interest payment dates are Jan 1st and Jul 1st. The yield to maturity on the bond is: A. 6.98% B. 7.58% C. 8.00% D. 9.73%
D
Special assessment bond issues are used to fund a public improvement that will: I accrue to the public at large II accrue to segment of the public III be paid from taxes which have no relationship to the value of the benefit received IV be paid from taxes which have a relationship to the value of the benefit received A. I and III B. I and IV C. II and III D. II and IV
D
The city of Jacksonville, Florida is issuing $100,000,000 of general obligation bonds paying interest on January 1st and July 1st of each year until maturity. The dated date of the issue is June 1, 2013. The first payment will be made on January 1, 2014. A bondholder purchases the issue at the offering. The first interest payment will cover a period of: A. 1 month B. 5 months C. 6 months D. 7 months
D
The interest received from a Collateralized Mortgage Obligation is subject to: A. Federal income tax only B. State income tax only C. Local income tax only D. Federal, State and Local income tax
D
The largest participants in the trading of U.S. Government debt include: I Domestic money center banks II Foreign money center banks III Domestic Broker-Dealers IV Foreign Broker-Dealers A. I and II only B. III and IV only C. I and III only D. I, II, III, IV
D
The revenue fund consists of: A. monies to pay for extraordinary maintenance or replacement costs B. monies to pay for regularly scheduled major repairs and replacement costs C. monies to meet debt service requirements D. all gross revenues from the facility
D
Under FINRA rules, if a member firm wishes to offer a structured product to its customers, all of the following statements are true EXCEPT: A. The member has an obligation to perform a reasonable basis suitability determination before recommending the product to any of its customers B. The member must use its expertise to determine if the potential yield of the structured product is an appropriate rate of return in relation to the volatility of the reference asset C. The member must determine that its recommendation to purchase a structured product is suitable for that particular investor D. The member must determine that an investment in the reference asset is suitable for that particular investor
D
When does an investor receive payment of interest and principal on a Capital Appreciation Bond (CAB)? I Interest is paid semi-annually II Interest is paid at maturity III Principal is paid semi-annually IV Principal is paid at maturity A. I and III B. I and IV C. II and III D. II and IV
D
Which are true statements regarding government agencies and their obligations? I Ginnie Mae is a publicly traded company II Ginnie Mae is a U.S. Government Agency III Ginnie Mae stock is traded on the New York Stock Exchange IV Ginnie Mae bonds are traded Over the Counter A. I and III B. I and IV C. II and III D. II and IV
D
Which of the following statements are true regarding Eurodollar bonds? I Eurodollar bonds are issued by both domestic and foreign corporations II Eurodollar bonds are denominated in U.S. dollars only III Trading does not take place in the United States IV The securities are not registered with the SEC A. I and III only B. II and IV only C. II, III, IV D. I, II, III, IV
D
