unit 7
a tip spawned as a coupon of 3%. over a 2-year period, the annual inflation has been 4.5% at the end of that time, the principal value of the tips would be
$1,093.08. tip sponge have the special feature of adjusting the principal value every 6 months by the inflation rate. with an annual rate of 4.5% the adjustment is 2.25% semiannually. there are two ways to solve this. One is to take a calculator given to you at the test center and multiply 1,000 by 102.25% take the result and multiply that times 102.25%. do that two more times since there are four adjustments in two years and the ending number will be $109.38. A faster way is to take the simple interest at 4.5% per year that is $45 per year or $90 for the two years add that to the original principal and get 1090. that is not the correct answer but the next highest number of the answer choice is.
it expand has a coupon of 3%. over to your period, the annual inflation rate has been 4.5%. at the end of that time, principal value of the tips would be
$1093.08. tip sponge have a special feature of adjusting the principal value every 6 months by the inflation rate. with annual rate of 4.5% the adjustment is 2.25% send me annually there are two ways to solve this. One is to take the calculator given to you at the test center and multiply 1,000 times 102.25%. take the result in multiply that times 102.25%. do that two more times since there are four adjustments in two years, and the ending number will be $1,093.08. A faster way is to take the simple interest at 4.5% per year that is a $40 per year or $90 per 2 years. and that to the original principal and get 1, 090. that is not the correct answer but the next highest number in the answer choice is.
disregard commissions, and investor purchasing $10,000 face amount of a treasury notes at a price of 98.12 would expect to pay
$9,837.50. please note that the purchase is not for $1,000 but for $10,000 treasury notes are quoted in 32nds. discord on 98.12 is 98.12/32 or 98 and 3/8% of $10,000.
A dealer in US government securities quotes a 5-year Treasury note as 89.12-89.16. in dollars that represents a spread of
1.25. Treasury notes and bonds are quoted in fractions of 32nds. The spread between the bid and the ask is 4/32nds. in simpler terms that is 1/8. each point is $10, so this 1/8 of $10 is equal to 1.25.
a customer owns 10M of 7% US Treasury bonds. He's in the 28% federal tax bracket in the 10% state tax bracket. what is his annual tax liability on these bonds?
196. The 10M means 10,000, remember your Roman numerals, m equals 1,000. his tax liability is as follows 1,000 * 7% = $70 annual interest per bond. 70 * 10 = $700 annual interest, which is taxable only at the federal government. and $700 * 28% = 196 tax liability.
US Treasury bills are issued for the following maturities except
39 weeks. as of the authoring date of this question, Treasury bills are issued for terms of 4, 8, 13, 26, and 52 weeks. The Treasury auction of this 52-week bill every 4 weeks and the 4, 8, 13, and 26-week bills every week.
United States Treasury notes are intermediate like securities. Treasury notes are not issued with maturities of
4 years. US Treasury units are issued with maturities of two, three, five, seven, and 10 years.
interest income from all of the following are exempt from state and local taxation except
FNMA mortgage-backed securities. as a general rule, interest from income from US government and agency securities is subject to federal taxation only it is generally exempt from state and local taxation. however, the interest and come from mortgage-backed securities is fully taxable.
One of your customers would like to purchase a government agency security for the UTMA account for her daughter. The daughter worked in construction over the summer and would like to use $1,275 of her savings for the purchase. securities issued by which of these agencies could be purchased for this account?
Federal national mortgage association FNMA. of this group, only agency that would be able to sell $1,275 of securities is fanny May. their securities are available with minimum denominations of $1,000 and then increments of $1. FHLMC also has the $1,000 additional minimum but with $1,000 increments. The same numbers apply with the FCS, and Sallie Mae's minimum is $10,000. another agency that would have met the investors need is GNMA
One of your customers would like to purchase a government agency security for the UTMA account of her daughter. The daughter worked in construction over the summer and would like to use $1,275 of her savings to purchase. securities issued by which of these agencies could be purchased for this account?
Federal national mortgage association Fannie Mae. of this group, the only agency that would be able to sell $1,275 of securities is Fannie Mae. their securities are available with a minimum denomination of $1,000 and increments of $1 FHLMC also has the $1,000 initial minimum but with $1,000 increments. The same numbers apply to FCS and Sallie Mae's minimum is $10,000. another agency that would have met the investors needs is GNMA..a
which of the following agencies securities has the strongest backing of timely payment and principle interests?
GNMA s. of the agency securities listed here, the only one that has direct obligation of the US government is the GNMA. The others are quite safe but only a moral obligation. please do not be fooled by the treasury note - that is not an agency security. this is a perfect example of why it is so important to carefully read the question.
which of the following agency securities has the strongest backing for timely payment of principal and interest?
GNMAs. of the agency securities listed here, the only one that has a direct obligation of the US government is GNMA. The others are quite safe but only a moral obligation. please do not be fooled by the treasury note that is not an agency security. this is a perfect example of why it is so important to carefully read the question.
which of the following is not part of the federal farm credit system?
The Federal home loan Banks. The federal farm credit bank system is for farms not homes.
pastor securities are issued by all of these except
The farm credit system. The farm credit system FCS is a national network of lending institutions that provides agricultural financing and credit. The federal FCS issues discount notes, floating rate bonds, and fixed rate bonds. The maturities range from one day to 30 years. unlike mortgage agencies these are not passed through investments.
an investor purchases $10,000 worth of treasury bills on November 27th and holds them until they mature on March 30th of the following year. for purposes of taxation, the interest from those treasury bills is treated as
Virginia income subject to federal income tax. interest on treasury bills, notes, and bonds is taxable as an ordinary income at the federal level. it is except from state and local taxation.
A treasury bond is quoted in the Wall Street journal as follows bid 100: 15 asked 100: 17 bid charge -1 yield 7.9 from this information you know the nominal yield is
greater than 7.90%. The bid and the asked prices show that the treasury bond is being quoted at a premium, with yield to maturity at 7.9%. when bonds are traded at a premium, the nominal yield coupon rate is greater than the yield to maturity.
which of the following statements regarding Sallie Mae debentures are true
interest is tax exempt at the state and local levels. interest on non-mortgage-backed government securities is taxable at the federal level and exempt at the state and local level. as a general rule, debentures pay interest every 6 months. Sallie Mae is not backed by the taxing power of the US government, and money is used for student loans for higher education.
if an investor watches the latest t-bilt auction fall to 4.71% from 4.82%, the best interpretation is that
investors who purchased bills at this auction paid more for them than purchasers last week. The rates on the tables fell so prices rose, and the investor paid more for the bills this week than last week. The decline in yields indicates there was good demand for the securities because the price rose driving the yields down. The question does not indicate the price of tea bills 12 weeks ago; it is unclear if the investor paid less for the t-bill then. The federal funds rate and other short-term interest rates would decline not rise in line with those of t-bills.
for both US Treasury notes and ginnie Maes
quotes are as a percentage of part in 32nds. interest from you is tea notes as tax at the federal level only, while interest on Jenny Mays is text at all levels. GNMA bonds are treated like corporate bronze in many ways. T notes settle next day, well Jenny Mays normally settle T + 2. interest on T notes is computed on an actual day basis, and Jenny make interest is computed on a 30-day 360 day year basis. both Jenny Mays and T notes are coded in 32nds
if an investor keeps $100,000 invested in US Treasury bills at all times during a 10-year period, she is subject to which of the following?
stable principle and unstable interest. Treasury bills are purchased at a discount and mature at face value. this feature provides principal stability to investors who own them The discount on bills is determined by current market interest rates and fluctuates accordingly.
which of the following statements regarding the federal farm credit system securities are not true
they are direct obligations of the US government. with the exception of ginnie Mae, all agency securities are indirect obligations of the US government.
a customer with an income objective who resides in a state with high personal income tax might find it best to purchase
want to shoot by the US Virgin Islands. funds issued by US territories such as Virgin Islands, or a triple tax exempt. that is investors do not have to pay federal state or local income taxes on the interest. Judy May and corporate debt securities are taxable on all levels. All literary strips are exempt from state income tax, has their coupon bond, it provides no income.
Treasury strips and treasury receipts are quoted based on
yield to maturity. not interest bearing securities like zeros are quoted based on their yield to maturity. they are sold at a discount and mature at par.
