Series 52: Chapter 4

tranches

A CMO mortgage backed security that creates various classes of bonds called __________

broker

A _______ acts as an intermediary by arranging a trade between a buyer and seller, and receiving a commission for performing that service

same day

A cash transaction settles the ______ ___

market

A dealer providing a bid and offer on the same security is said to be making a _______

dealer

A government securities _____ buys and sells treasury securities for its own account

next day

A government security settles on the ______ ___

liquidity principal

A primary dealer is designated by the reserve bank of new york and they provide _________ to the treasury market and often act on a __________ basis

hedging

A trading strategy taking a position in treasuries or derivatives that reduces the risk of holding another position is called _________

arbitrage

A trading strategy that attempts to profit on the price difference between two identical or similar securities is called __________

10

All CMO advertising must be filed with FINRA __ days in advance of use

nonnegotiable

All savings bonds are ______________

foreign

Bankers' acceptances are used to facilitate ________ trade

book

Both notes & bonds are currently issued in ____ entry form

prepayment

CMOs help minimize ___________ risk of the underlying securities by spreading it out among the various tranches

270

Commercial paper is short-term, unsecured corporate debt, which typically matures in ___ days or less.

prospectus

Due to commercial papers short maturity they are exempt from the __________ requirement of the act of 1933

fiscal agent

Each agency chooses a ______ ______ to issue its securities and pay principal and interest on them-- most agencies use the federal reserve banks

agencies sponsored

Federal ___________ are direct arms of the us government. Government ___________ Enterprises are publicly chartered by privately owned

not

Federal home loan banks are ___ backed by the us government

selling group bank

Government Sponsored Enterprises issues securities through a ________ _____ of dealers. Proceeds of the offering are lent to a _____ and then the bank lends the money to people needing financing

reverse repurchase

If a dealer purchases securities and agrees to sell them back to the other dealer at a specific time and price it is called a _______ ___________ or matched sale

amortized

If a treasury (bond or note) is purchased at a premium the premium must be __________ each year

prepayment

In addition to the inherent risks in all fixed-income, mortgage back securities are also subject to __________ risk. When people pay off their homes early

state

Interest on all types of us savings bonds is exempt from _____ taxes

matures

Interest on t-bills must be reported in the year the t-bill _________

earned

Interest on t-bonds/ t-notes must be reported in the year it is __________

accreted

Interest on zero-coupon bonds must be __________ each year

federal

Interest paid on US Treasury securities is taxable at the ________ level

2 20 liquidity principal fdic

Long term or brokered cds generally have maturities from _ to __ years. There may be limited ________, loss of ________ they could have call features and ____ insurance may not apply

fed funds

Money borrowed overnight on a bank-to-bank basis is known as ___ ______. It is usually used to allow a bank to meet reserve requirements

pass rates investors

Most common security is the mortgage backed ___ through certificate. A pool of mortgages that contain similar interest ____ and maturities. Interest in the pool are sold to __________ as pass through certificates

100000 fdic

Negotiable CDs have a minimum denomination of $___,___ but typically trade in denominations of one million dollars or more. Due to their large size a negotiable CD is normally not covered by the ____

agency

Payments of principal and interest on the _______ securities are made through the fedwire system

principal

Plain vanilla CMO each tranche receives interest payments but only one tranche receives _________ repayments

percentage par

Prices for treasury notes and bonds are quoted as a __________ of their ___ value

issuers

SLGS are sold to _______ of municipal bonds

secondary

Savings bonds are called nonmarketable/nonnegotiable because they cannot be sold in the _________ market. They can only be redeemed by the US government

30 50 twice

Series EE bonds are __ year investments that are purchased at __% Discount from face value ranging from $50-$10,000. Fixed rate of interest is reset _____ a year

20 twice public

Series HH bonds are __ year investments that pay investors ________ a year that as of august 2004 are no longer offered to the _______

inflation face 30

Series I bonds are indexed for ___________ they are sold at ______ value and pay interest for up to __ years.

yield

T-bills are quoted on a discounted _____ basis. This represents the percentage discount from the face value of the security

average life

The average mount of time that each dollar of principal invested in the bond is expected to be outstanding is called the ________ _____

issues

The department of treasury ______ treasury securities through the FRB which acts as a fiscal agent for the government

spread

The difference between a bid and an offer is called the _______

inter dealer

The person who acts as an intermediary between primary dealers and other government securities dealers are called ____ ________ brokers

ask

The price a dealer is willing to sell a security at is called...

bid

The price at which a dealer is willing to buy a security is called...

coupon

The yield on an escrow account (sinking fund) may not exceed the ______ of the debt

marketable nonmarketable

There are two major groups of treasury securities 1.___________ 2. ___________ or nonnegotialbe

money market

These are short term debt securities (one year or less) that is classified as cash equivalents... we call them _____ _______ securities

cash management

These bills are unscheduled short-term debut used to even out cash flow. They can be as short as one day and are issued at a discount. They are called _____ ___________ bills

tenders noncompetitive competitive

To buy a treasury bill, note or bond potential purchasers submit ________ an individual submits a ______________ tender and will accept the yield determined at the auction. Institutions submit _____________ tenders that state the price or yield the firm is willing to purchase at.

finance

Traders also must through bank loans or repurchase agreement or by borrowing stock or arranging reverse purchase agreements ____________ a position

quotes

Traders are required to supply price information by providing ________ to other dealers, interdealer brokers and to customers

position

Traders duties include buying treasuries for the firms account or selling for the firms account this is called _________ trading

inflation

Treasury Inflation-Protected Securities, the principal value of these securities is __________ adjusted based on the consumer price index.

twice maturity

Treasury Notes & Bonds pay a fixed rate of interest _____ a year and the investor receives the face value upon _________

bills

Treasury _____ mature in one year or less, have a minimum denomination of $100, and are only issued in multiples of $100

bonds

Treasury ______ have initial maturities of more than ten years

notes

Treasury _______ have initial maturities ranging from two to ten years

discount

Treasury bills are always sold at a ________ from their face value

zero discount

Treasury created its separate trading of registered interest and principal of securities program (STRIPS.) Dealers buy t-notes and t-bonds, resell the coupons and the principal payments as ____-coupons after getting approval through a federal bank. Sold at a ___________ and quoted on a yield basis.

repurchase

When a dealer sells securities to another dealer and agrees to repurchase them at a specific time and price it is called a __________ agreement

GNMA

Which organization FHLMC, FNMA or GNMA? This is a true government agency backed by the US Treasury to finance residential housing. They are direct obligations of the US government. They issue mortgage backed securities, participation certificates and modified pass-through certificates. They guarantee monthly payments to the owner of certificates even if the mortgage payments have not yet been collected.

FNMA

Which organization FHLMC, FNMA or GNMA? This organization purchases FHA loans, VA loans and conventional residential mortgages from lenders. All issues are backed by its authority to borrow from the treasury

FHLMC

Which organization FHLMC, FNMA or GNMA? Provides liquidity to federally insured savings institutions by purchasing residential mortgages. They raise money by issuing mortgage backed bonds, pass-through certificates and guaranteed mortgage-backed certificates. They also issue notes, bonds and stock that trades on the NYSE

fixed principal

With Treasury Inflation-Protected Securities, the rate of interest is ______ however the __________ amount on which that interest is paid may vary

invested

With t-bills the bond equivalent yield provides for the fact that the interest earned is on the amount _________ rather than the face amount

discount greater

With t-bills the higher the yield, the larger the ___________. Therefore a lower price, the bid will appear to be ________ than the ask

1 32

government securities are quoted in increments of _/__ of par