SIE Chapter 5: Municipal Debt and Money Market Instruments

A "qualified" legal opinion is on which: A. gives a conditional affirmation of the legality of the securities B. gives an unconditional affirmation of the legality of the securities C. is given by a qualified bond counsel D. qualifies the issue for a federal tax exemption from taxation

a

A key characteristic of municipal bonds is: A. the interest income earned is tax exempt at the federal level B. the returns earned are guaranteed by the government C. the bonds are issued by the federal government D. the bonds are secured by collateral

a

A municipality is at its debt limit and wishes to sell additional bonds. Voter approval is required for the municipality to sell: A. general obligation bonds B. revenue bonds C. industrial revenue bonds D. water and sewer bonds

a

Both issued by states, cities, and countries are commonly known as: A. municipal bonds B. corporate bonds C. treasury bonds D. agency bonds

a

CDs are all of the following, except: A. always long-term investments B. certificates of deposit C. instrument that allow bank, savings and loan, and credit union customers to receive higher interest on their deposits that a savings or checking account D. investments that include bank CDs, brokerage CDs, brokerage long-term CDs, negotiable CDs, and jumbo CDs

a

If an issuer defaults on a moral obligation bond, payment can only be made by: A. legislative apportionment B. judicial edict C. legal authorization D. municipal injunction

a

Which of the following municipal issues us a short term note that is retired by a later permanent bond sale? A. BAN B. RAN C. TAN D. TRAN

a

Which statement is FALSE regarding Brokered CDs? A. call features are not permitted on these instruments B. how the instrument is titled can determine whether FDIC insurance covers the investment C. there is no penalty for early withdrawal of principal D. these instruments can have maturities of up to 5 years

a

A municipality is at its statutory debt limit and cannot legally issue more debt backed by taxing power. Which of the following bonds can be issued? A. general obligation bonds B. moral obligation bonds C. double barreled bonds D. treasury bonds

b

All of the following are true of money securities, except? A. considered very safe B. are typically illiquid C. often cannot keep up with inflation because of low yields D. examples include U.S. treasury bills, commercial paper and banker's acceptance

b

If a regular way municipal bond trade takes place on Monday, June 2nd, the trade will settle on: A. Tuesday June 3rd B. Wednesday June 4th C. Thursday June 5th D. Friday June 6th

b

In which of the following instances would a municipality definitely not issue RANs? A. the municipality needs funds to finish a toll road, but it will soon be able to pay the notes with the toll money B. the municipality needs money now to finish construction of a school. it will repay the notes with ad valorem tax money C. the municipality needs funds to help finish building a prison. the lease payments from the prison will repay the notes D. the municipality is building a sports stadium and will repay the notes with money from tickets sold

b

Negotiable Certificate of Deposits are issued at: A. a discount and pay interest monthly B. par and pay interest a maturity C. par and pay interest monthly D. a discount and pay interest at maturity

b

The final responsibility for the debt service on industrial revenue bonds rests with the: A. issuing municipality B. corporate lessee of the facility C. bond trustee D. bond underwriter

b

The maximum maturity on a commercial paper is: A. 90 days B. 270 days C. 360 days D. 3 years

b

When a municipal general obligation bond is backed by ad valorem taxes, what type of taxes are utilized for payment? A. entertainment B. property C. sales D. income

b

Which statement is FALSE regarding Brokerage CDs? A. these instruments have a limited trading market B. there is a penalty for early withdrawal C. there can be a loss of principal upon an early withdrawal D. there is FDIC insurance on these products as long as the CD is titled in the customer's name

b

One reason why an investor choose to purchase treasury or municipal bonds is that: A. they have a higher interest rates than corporate bonds B. their taxes do not fluctuate C. they have a lower tax rate on interest than corporate bonds D. they have a lower interest than government bonds

c

Types of funds used to back revenue bond issues include all of the following EXCEPT: A. excise taxes B. lease rentals C. ad valorem taxes D. enterprise activity income

c

Which of the following are not included in the official statement? A. legal opinion verifying the municipality's authority to issue the bonds B. protective covenants C. the type of investor that would be suitable to purchase this issue D. financial condition of the issuer

c

Which of the following is true about municipal bonds? A. municipal bonds trade on an exchange called EDGAR B. there is an active secondary market for municipal bonds C. municipal bonds mostly trade OTC D. municipal bond investors tend to buy bonds in states they don't reside in because of the tax benefits

c

Which type of security would be suitable for a conservative investor in the highest income tax bracket? A. U.S. treasury securities B. penny stocks C. municipal bonds D. CMOs

c

Which would be a typical denomination for a money market instrument to be traded in? A. round lot of 100 B. $100 increments C. $1,000,000 or $5,000,000 D. $1,000 par bonds

c

A municipal bond which funds an improvement that benefits only a small portion of the community is a: A. general obligation bond B. double barreled bond C. moral obligation bond D. special assessment bond

d

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

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

To satisfy MSRB disclosure requirements for new municipal issues, a customer would be provided with a copy of the: A. legal opinion B. official notice of sale C. prospectus D. official statements

d

What would be evaluated in the feasibility study prepared prior to the issuance of revenue bonds? A. enabling legislation B. tax statutes C. bond trust indenture D. expected operating costs of the facility

d

Which of the following debt instruments settle one business day after the trade date? A. corporate bonds B. municipal bonds C. commercial paper D. treasury bills

d

Which of the following is a characteristic of money market instruments A. traded in round lots of 100 B. typically issued at par value with regular monthly payments C. commonly traded in the retail market D. commonly traded by the federal reserve to control interest rates

d