Missed Kaplan (Bonds)

Which of the following is NOT part of the Federal Farm Credit System? A. the federal home loan banks B. the federal intermediate credit bank C. the bank of cooperatives D. the federal land banks

A. the federal home loan banks

If a municipal bond maturing in 10 years is bought for 110, its cost basis at the end of the sixth year is A. 100 B. 104 C. 106 D. 101 1/2

B. 104

Which of the following would be considered an equity security? A. a CMO B. a prior lien preferred stock C. an ELN D. an ETN

B. a prior lien preferred stock

When part of an issue of speculative bonds w/ a 25-year maturity are called, the effect on the remaining bonds will be to A. increase their coupon rate B. decrease their coupon rate C. improve their quality D. decrease their quality

C. improve their quality

T-bills are quoted A. in 32nds B. as a percentage of par C. on an annualized discount yield basis D. in 16ths

C. on an annualized discount yield basis

A US Treasury bond is quoted at 103:24. The dollar amount represented by this quote is A. $103.24 B. $1,032.40 C. $1,030.24 D. $1,037.50

D. $1,037.50

A convertible corporate bond w/ an 8% coupon yielding 7.1% is available but may be called sometimes this year. Which feature of this bond would probably be LEAST attractive to your client? A. near-term call B. coupon yield C. convertibility D. current yield

A. Near-term call

Which of the following would be most likely to issue an equipment trust certificate? A. an airline company B. a company using specialized equipment on an oil drilling rig C. a user of farming equipment D. a social media company installing new servers

A. an airline company

Bondholders may not take action against the corporation if it fails to make interest payments for A. income bonds B. subordinated debentures C. debentures D. convertible bonds

A. income bonds

Which of the following statements regarding Treasury receipts is NOT true? A. interest income is taxed at maturity B. treasury securities held in trust collateralize the receipts C. treasury receipts pay interest at maturity D. treasury receipts are not backed by the faith and credit of the US government

A. interest income is taxed at maturity

An issuer of a bond will apply to the rating services for a rating for the purpose of A. reducing credit risk B. reducing the bond's duration C. reducing interest rate risk D. reducing liquidity risk

A. reducing credit risk

The call provisions of a municipal issue would be detailed most completely in A. the bond resolution B. the legal opinion C. the official notice of sale D. the Bond Buyer

A. the bond resolution

When a corporation issues a debt security, the terms of the loan are expressed in a document known as the bond's indenture. The indenture is sometimes referred to as A. the deed of trust B. the loan agreement C. the debenture D. the bond resolution

A. the deed of trust

A municipal bond dealer is making a bona fide quote. Which of the following statements regarding such a quote is true? A. the quote must have a reasonable relationship to fair market value B. the quote need not be one that the dealer is prepared to act upon (buy or sell) C. the quote cannot represent an offer to sell bonds that the dealer does not currently own D. the quote may not take into consideration any anticipated market movement

A. the quote must have a reasonable relationship to fair market value

The income from all of the following securities is taxable on the federal, state, and local income tax levels except A. treasury bonds B. GNMA certificates C. corporate BBB bonds D. reinvested mutual fund dividends

A. treasury bonds

The SEC recognizes all of the following under the Credit Rating Agency Reform Act as being registered w/ the commission to rate debt instruments. Which of them historically has specialized in ratings for the insurance sector? A. S&P's B. A.M. Best C. Moody's D. Fitch Ratings

B. A.M. Best

Treasury STRIPS and Treasury receipts are quoted based on A. 0.03125 (1/32 of a point in dollars) B. YTM C. 0.125% (⅛ of a point in dollars) D. amortization of premiums

B. YTM

During a period of sustained low interest rate, many investors, particularly institutions, look to increase their return through alternative debt investments. Examples of those would include all of the following EXCEPT: A. private placement debt B. leveraged ETFs C. equity-linked notes D. exchange-traded notes

B. leveraged ETFs

Which of the following debt instruments trades w/ accrued interest? A. treasury bills B. negotiable CDs C. bankers acceptances D. zero-coupon issues

B. negotiable CDs

All of the following municipal securities are quoted on a yield basis except A. tax anticipation notes B. term bonds C. serial bonds D. secured bonds

B. term bonds

Under what circumstances will a dilution of equity occur? A. issue of mortgage bonds to replace debentures B. the conversion of convertible bonds into common stocks C. stock split D. stock dividend

B. the conversion of convertible bonds into common stocks

An economist is comparing the yields on 20-year US Treasury bonds and AAA-rated corporate bonds with the same maturity. The economist is analyzing A. the value spread B. the credit spread C. the duration spread D. the risk spread

B. the credit spread

Your customer wishes to lock in a long-term yield w/ minimal risk and is not interested in regular income. Which of the following securities should you recommend? A. treasury bond B. treasury STRIPS C. corporate A-rated zero-coupon bond D. treasury bill

B. treasury STRIPS

A TIPS bond has a coupon of 3%. Over a two-year period, the annual inflation rate has been 4.5%. At the end of that time, the principal value of the TIPS would be A. $1060.00 B. $1090.00 C. $1093.08 D. $1061.36

C. $1093.08

The basis of a bond w/ a 5% nominal yield maturing in twenty years and selling at 115 is approximately A. 4.35% B. 5.75% C. 3.95% D. 4.65%

C. 3.95%

An investor purchases a zero coupon bond at a price of 64. The bond matures in nine years. Five years later, the investor sells the bond at a price of 80. This would result in A. a long-term capital gain of $160 B. no gain and no loss C. a long-term capital loss of $40 D. a long-term capital loss of $200

C. a long-term capital loss of $40

In recent years, much publicity has surrounded the rapid growth of start-up businesses. In most cases, the early financing was done privately. When private debt is used at the intermediate stage of a company's development, it is called A. mid-term debt B. middle-risk debt C. mezzanine debt D. intermediate debt

C. mezzanine debt

It is most accurate to state that commercial paper is A. generally purchased by small investors B. secured C. sold at a discount D. interest bearing

C. sold at a discount

The industry term "junk bond" applied to a bond w/ a S&P's rating no higher than A. BBB B. B C. C D. BB

D. BB

Which of the following instruments is essentially a letter of credit? A. commercial paper B. margin loans C. negotiable CDs D. Bankers' acceptances

D. Bankers' acceptances

A bond issued by a Swiss company, sold outside of the US and the issuer's country, but for which the principal and interest rate are stated and paid in USD, is the definition of a A. Francodollar bond B. Matterhornbond C. Eurobond D. Eurodollar bond

D. Eurodollar bond

Which of the following agencies approves private lending institutions to issue bonds that are backed by the full faith and credit of the US government? A. financial guaranty insurance company (FGIC) B. federal home loan mortgage corporation (FHLMC) C. federal national mortgage association (FNMA) D. government national mortgage association (GNMA)

D. GNMA

A quote of 2.20 bid 2.18 offered would most likely be a quote on A. a GO bond B. a Ginnie Mae bond C. a T-bond D. a T-bill

D. a T-bill

Which of the following debt instruments would likely be suitable for sophisticated investors only? A. first mortgage bonds B. debentures C. jumbo CDs D. equity-linked notes

D. equity-linked notes

A respected analyst reports that last week's T-bill rate at 1% is lower than the rate for the preceding week and lower than the average for the past month. Which of the following is TRUE? A. investors are paying less for T-bills B. the general level of interest rates is increasing C. prices are descending D. investors are paying more for T-bills

D. investors are paying more for T-bills

A municipal securities principal must approve all of the following except A. the handling of written customer complaints B. the opening of new customer accounts C. each transaction in municipal securities D. legal opinions

D. legal opinions

An investor might expect to receive the greatest gain on an investment in a corporate bond by purchasing A. short-term bonds when interest rates are high B. long-term bonds when interest rates are low C. short-term bonds when interest rates are low D. long-term bonds when interest rates are high

D. long-term bonds when interest rates are high

In the UK, they are called gilts. In Germany, they are called Bunds. In France, they are called OATS. To investors, they are known as A. stock exchanges B. commodities C. eurobonds D. sovereign debt

D. sovereign debt

Due to a sudden drop in earnings, the BoD of AMI has voted to suspend all dividend payments this year. This would have the least effect on holders of AMI A. senior claim preferred stock B. callable preferred stock C. cumulative preferred stock D. subordinated debentures

D. subordinated debentures

The legal contract stating the issuer's obligation to pay back a specific amount of money on a specific date to its bondholders is best described as A. the prospectus B. the official statement C. the official notice of sale D. the trust indenture

D. the trust indenture

A bond analyst plots the yields of AAA corporate bonds and compares them to the yields of US Treasury bonds with similar maturities. This is known as A. inverse yield analysis B. yield plot analysis C. yield comparison analysis D. yield curve analysis

D. yield curve analysis

Freddie Mac does which of the following? I. issues pass-through securities II. purchases student loans III. purchases conventional residential mortgages from financial institutions IV. issues securities backed directly by the full faith and credit of the US government

I and III

Which of the following statements regarding municipal securities quotations are true? I. a quotation can be an indication of interest II. a quotation cannot be an indication of interest III. a quotation can be a one-sided request for a bod or offer (bids wanted and offers wanted) IV. A quotation cannot be a one-sided request for a bid or offer (bids wanted and offers wanted)

I and III

Investors placing zero-coupon bonds in their portfolios are most likely to be looking to provide I. accumulation of capital II. current income III. protection against reinvestment risk IV. tax deferral

I and III only

Which of the following are money market securities? I. Commercial paper II. Treasury bonds III. ADRs IV. Negotiable CDs

I and IV

Which of the following statements regarding negotiable CDs are true? I. the issuing back guarantees them II. they are issued at a discount III. minimum denominations are $1,000 IV. they are traded in the secondary market

I and IV

If LMN, Inc., has filed for bankruptcy, in what order would interested parties be paid? I. holders of secured debt II. holders of subordinated debentures III. general creditors IV. preferred stockholders

I, III, II, IV

Which of the following statements regarding Sallie Mae debentures are true? I. interest is generally paid monthly II. interest is generally paid semiannually III. interest is exempt from state and local taxation IV. interest is not exempt from state and local taxation

II and III

If a US corporation wishes to issue eurodollar bonds, which of the following statements are true? I. the corporation will be subject to currency risk II. the corporation will not be subject to currency risk III. the issue must be filed w/ the SEC IV. the issue need not be filed w/ the SEC

II and IV

Which of the following are characteristics of commercial paper? I. It is registered w/ the SEC II. It is a short-term debt instrument III. It is issued by commercial banks IV. It is unsecured debt

II and IV