Series 7 Unit 6 Quiz

An investor is looking to purchase securities that are exempt from registration under the Securities Act of 1933. Which of the following securities would not fit the investor's condition?

Debentures of First Newtown Bank Holding Corporation Bank holding company securities are not exempt from registration requirements under the Securities Act of 1933. Treasury securities, agency securities (such as GNMA pass-through certificates), and municipal securities (such as revenue bonds) are exempt from registration requirements under the act.

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. The interest income from most U.S. government and agency securities is exempt from state and local—but not federal—taxes. Mortgage-backed securities (such as FNMA and GNMA obligations) are subject to federal, state, and local taxes. The interest on municipal issues (like the Minneapolis Housing Authority bonds) is exempt from federal taxes and, because this investor is a Minnesota resident, state taxes as well.

Which of the following usually does not pay interest semiannually?

GNMA pass-through certificates pay principal and interest monthly. The others usually pay interest semiannually.

Which of the following securities makes monthly distributions to its investors?

Ginnie Mae pass-through certificates

Which of the following statements regarding Treasury receipts is not true?

Interest income is taxed at maturity.

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 concerning the Federal National Mortgage Association (FNMA or Fannie Mae) is true?

It provides liquidity to the U.S. housing finance market primarily by securitizing mortgage loans on residential properties into mortgage-backed securities that it guarantees.

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?

Of this group, the only agency that would be able to sell $1,275 of securities is Fannie Mae. Their securities are available with a minimum denomination of $1,000 and then increments of $1. FHLMC also has the $1,000 initial minimum, but with $1,000 increments. The same numbers apply to the FCS, and Sallie Mae's minimum is $10,000. Another agency that would have met the investor's need is GNMA.

All of the following are used to back collateralized mortgage obligations except

Sallie Mae (Student Loans)

An individual with $100,000 to invest will require these funds in six months for the purchase of a house. In which of the following circumstances did the registered representative act correctly?

The registered representative convinced the client to invest in a Treasury bill on the basis of its safety.

A client interested in Treasury bills (T-bills) asks you to explain their features. Which of these is correct?

They are quoted with a bid higher than the ask.

Income from all of the following securities is fully taxable at the federal, state, and local levels except

Treasury bonds.

Municipal securities issued by which of the following are triple tax exempt?

U.S. territories

A registered representative (RR) is recommending to his client a newly issued debt security backed by the U.S. government with a maturity of seven years. This security is most likely

a Treasury note. (mid term)

Your client lives in a state with a very high state income tax; there is also a city tax. The client wishes to invest in a debt security that will avoid those taxes. You might suggest

a U.S. Treasury bond.

The terminology guaranteed full faith and credit is most applicable to

interest and principal on a U.S. government-issued bond.

All of the following statements regarding Treasury bills are correct except

most Treasury bill issues are callable. Treasury bills trade at a discount to par and are 4, 13, or 26 weeks in original maturity. (Maximum maturities are subject to change.) They are a direct obligation of the U.S. government and are noncallable.

The function of the Federal National Mortgage Association (FNMA) is to

purchase FHA-insured, VA-guaranteed, and conventional mortgages.