Debt: US Government Debt

A customer buys 5M of 3 1/4% Treasury Bonds at 98-8. How much will the customer receive at each interest payment?

$81.25

A 10-year 4 3/4% Treasury Note is quoted at 95-11 - 95-15. The note pays interest on Jan 1st. and Jul. 1st. A customer buys 10M of the notes. Approximately how much will the customer pay, disregarding commissions and accrued interest?

$9,546.88

140 Basis points equal:

1.4%

Which investment gives the greatest protection against purchasing power risk?

10 year TIPS

A customer with $50,000 to invest could buy:

2 mortgage backed pass through certificates at par

Which of the following trades settle in "Fed" funds?

Agency Bonds

Which statement is TRUE about the risks associated with federal agency securities?

Agency securities have market risk but virtually no credit risk

Which statement is TRUE?

Both Fannie Mae and Ginnie Mae issue mortgage backed pass-through certificates

Which statement is FALSE about CMBs?

CMBs are sold at a regular weekly auction

Which statement is TRUE about the Federal National Mortgage Association (FNMA)?

FNMA is a publicly traded corporation that issues pass through certificates which are not guaranteed by the U.S. Government

Which of the following is a TRUE statement regarding Fannie Mae?

Fannie Mae has issued negotiable debt and equity securities

Which agency issuing mortgage backed pass through certificates is permitted to purchase conventional home mortgages that are not VA or FHA insured?

Freddie Mac

Which statement is TRUE regarding Ginnie Mae?

Ginnie Mae debt obligations are traded Over-the-Counter

Prepayment risk applies to holders of:

Ginnie Mae 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

Which statement is TRUE regarding Treasury Bills?

No physical certificates are issued

Which characteristic is NOT common to both Treasury STRIPS and Treasury Notes?

Pay interest at maturity

U.S. Treasury securities are subject to which of the following risks?

Purchasing Power Risk

U.S. Government Agency securities are:

Quoted in 1/32nds and traded with accrued interest computed on a 30 day month / 360 day year basis

Which statement is TRUE regarding trades of U.S Government securities?

Regular way trades settle T+1 in Fed Funds

All of the following statements are true regarding Government National Mortgage Association pass-through certificates EXCEPT:

Reinvestment risk for GNMAs is the same as for equivalent maturity U.S. Government Bonds

Which risk is NOT applicable to Ginnie Mae Pass Through Certificates?

Risk of default if homeowners do not make their mortgage payments

What is quoted in terms of yield and trades at a discount?

T-Bill

Which statement is TRUE regarding Treasury Inflation Protection securities in periods of deflation?

The amount of each interest payment will decline and the principal amount received at maturity is unchanged at par

Which statement is TRUE regarding Treasury STRIPS?

The bonds are issued at a discount

Which statement about Treasury STRIPS is TRUE?

The investor's interest rate is locked in at purchase, eliminating any reinvestment risk

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. Which statement is TRUE regarding these T-Notes?

The trade will settle in Fed Funds and interest accrues on an actual day month / actual day year basis

The Federal Reserve would permit all of the following to be "primary" U.S. Government securities dealers EXCEPT:

Thrift institutions

All of the following statements regarding the trading of government and agency bonds are true EXCEPT?

Trading takes place on the New York Stock Exchange

All of the following trade "and interest" EXCEPT:

Treasury Bills

If interest rates are rising rapidly, which U.S. Government debt prices would be LEAST volatile?

Treasury Bills

Which of the following is issued without a coupon rate?

Treasury Bills

All of the following investments give a rate of return that cannot be affected by "reinvestment risk" EXCEPT:

Treasury Bond

A fixed income fund that holds which of the following investments would suffer the largest declines in value if market interest rates rise?

Treasury Bonds

Which statement is TRUE about Treasury Bonds?

Treasury Bonds are traded in 32nds

Which of the following investments gives a rate of return that cannot be affected by "reinvestment risk"?

Treasury STRIPS

Which of the following is a zero coupon original issue discount obligation?

Treasury STRIPS

Which statement about Treasury STRIPS is FALSE?

Treasury STRIPS are not susceptible to purchasing power risk

Which security does not earn any form of interest?

Treasury Stock

A government securities dealer quotes a 3-month Treasury Bill at 6.00 Bid - 5.90 Ask. A customer who wishes to buy 1 Treasury Bill will pay:

a dollar price quoted to a 5.90 basis

Treasury notes:

are issued in minimum $100 denominations

Series EE bonds:

are redeemed at par plus interest earned

Treasury Bonds are issued by the U.S. Government in:

book entry form for minimum denominations of $100

A high income client who lives in California would be more likely to buy a Treasury security as an investment because the interest income is:

exempt from California state income tax

All of the following statements are true about the Government National Mortgage Association Pass-Through Certificates EXCEPT:

interest payments are exempt from state and local tax

If Treasury bill yields are rising at auction, this indicates that:

interest rates are rising while bill prices are falling

The nominal interest rate on a TIPS is:

less than the rate on an equivalent maturity Treasury Bond

Interest payments on Ginnie Mae pass-through certificates are made:

monthly

Prepayment risk applies to holders of:

mortgage backed pass through certificates

A customer who lives in the state of New York who buys GNMA Pass-Through Certificate:

must include the interest income receive on both his federal tax return and his state tax return

Series EE bonds:

pay interest at redemption

A customer buys a $1,000 par Treasury Inflation Protection security with a 4% coupon and a 10 year maturity. If the inflation rate during the first year of the security's life is 5%, the:

principal amount is adjusted to $1,050 and the coupon rate remains at 4%

A pass through certificate is best described as a:

security which gives the holder an undivided interest in a pool of mortgages

The "modification" of Ginnie Mae modified pass through certificates is:

the guarantee of the U.S. Government

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. All of the following statements are true regarding this trade of T-Notes EXCEPT:

the yield to maturity will be higher than the current yield