Unit 7.2
A customer owns 10M of 7% U.S. Treasury bonds. He is in the 28% federal tax bracket and the 10% state tax bracket. What is his annual tax liability on these bonds?
$196
All of the following statements regarding the Federal National Mortgage Association (FNMA) are true except
FNMA is owned by the U.S. government
Interest income from all of the following are exempt from state and local taxation except
FNMA mortgage-backed issues
A resident of Minnesota is in the 28% federal tax bracket and the 4% state tax bracket. This person must pay both federal and state taxes on
Federal National Mortgage Association (FNMA) pass-throughs.
Securities issued by private lending institutions approved by which of the following are directly backed by the federal government?
Government National Mortgage Association (GNMA)
Which of the following agencies approves private lending institutions to issue bonds that are backed by the full faith and credit of the U.S. government?
Government National Mortgage Association (GNMA)
Which of the following usually does not pay interest semiannually?
Government National Mortgage Association (GNMA)
An investor interested in monthly interest income should invest in
Government National Mortgage Associations (GNMAs)
Freddie Mac does which of the following? Issues pass-through securities I. Purchases student loans II. Purchases conventional residential III. mortgages from financial institutions IV. Issues securities backed directly by the full faith and credit of the U.S. government
I and III
Which of the following statements regarding Sallie Mae debentures are true?
Interest is tax exempt at the state and local levels.
Which of the following statements regarding the Government National Mortgage Association (GNMA) is true?
Private lending institutions approved by GNMA originate eligible loans and sell the mortgage-backed securities to investors
Which type of risk is a mortgage-backed security most likely to experience?
Reinvestment rate risk
All of the following are used to back collateralized mortgage obligations except
Sallie Mae
All of the following issue mortgage-backed securities except
Sallie Mae
Which of the following statements regarding the Federal Farm Credit System securities are not true?
They are direct obligations of the U.S. government
One of the popular mortgage-back issues are those issued by the Government National Mortgage Association (GNMA). One of the reasons for their popularity is the elimination of
credit risk
Ginnie Mae pass-throughs will pay back both principal and interest
monthly
Pass-through securities are issued by all of these except
the Farm Credit System
If a customer owns a $10,000 8% U.S. Treasury Bond, and she is in the 28% federal tax bracket and a 2.5% state tax bracket, what amount of tax will she pay on the income received from the bond?
$224
A customer with an income objective who resides in a state with a high personal income tax might find it best to purchase
Bonds issued by the U.S. Virgin Islands
Which of the following is not part of the Federal Farm Credit System (FFCS)?
Federal Home Loan Bank
Which of the following agency securities has the strongest backing of timely payment of principal and interest?
GNMAs
Which of the following statements regarding Government National Mortgage Association (GNMA) securities are true? Interest is subject to federal income tax. Interest is exempt from federal income tax. They are backed by farm mortgages. They are backed by residential mortgages.
I and IV
Which of the following statements regarding Sallie Mae debentures are true? 1. Interest is generally paid monthly. 2. Interest is generally paid semiannually. 3. Interest is exempt from state and local taxation. 4. Interest is not exempt from state and local taxation.
II and III
Which of the following is not part of the Federal Farm Credit System?
The Federal Home Loan Banks
An investor purchases $10,000 worth of Treasury bills on November 27 and holds them until they mature on March 30 of the following year. For purposes of taxation, the interest from those Treasury bills is treated as
ordinary income subject to federal income tax
For both U.S. Treasury notes and Ginnie Maes,
quotes are as a percentage of par in 32nds
For an investor who needs regular income, a GNMA pass-through certificate would be attractive because
the investor would receive a monthly check
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 for the purchase. Securities issued by which of these agencies could be purchased for this account?
Federal National Mortgage Association
All of the following statements regarding Government National Mortgage Association (GNMA) pass-through securities are true except
GNMAs are considered to be the riskiest of the agency issues
An investor looking for income with the highest degree of safety would probably choose to purchase
GNMAs.
Which of the following statements regarding U.S. government agency obligations are true? They are direct obligations of the U.S. government. They generally have higher yields than direct U.S. obligations. The Federal National Mortgage Association (FNMA) is a publicly traded corporation. Securities issued by the Government National Mortgage Association (GNMA) trade on the NYSE floor.
II and III
Municipal securities issued by which of the following are triple tax exempt?
U.S. territories
The function of the Federal National Mortgage Association (FNMA) is to
purchase FHA-insured, VA-guaranteed, and conventional mortgages
All of the following issue securities under the Federal Farm Credit System except
the Federal Home Loan Mortgage Corporation
Interest on direct debt issued by the U.S. government is taxable at
the federal level and exempt at the state level
All of the following statements regarding government and agency securities are true except
they are always directly backed by the federal government
