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Debt Quiz I

Terms in this set (49)

New issues of short term municipal notes and bonds are available in which form?
Book Entry
A customer buys 10 ABC Corporation 10% debentures, M '45, at 93 on Tuesday, May 10th in a regular way trade. The interest payment dates are March 1st and September 1st. The trade settles on:
Thursday, May 12th
Income sources backing a special tax bond issue could be all of the following EXCEPT:
A. Excise Taxes
B. Sales Taxes
C. Income Taxes
D. Ad Valorem Taxes


Correct Answer: D
Which statement is TRUE about commercial paper?
The most common maturity is 30 days
An investor buys a bond at a discount. Later in the year, the bond is trading at a premium. This is termed:
Appreciation
Commercial paper with a maturity of 270 days or less:
Is an exempt security
A municipal bond which is secured by taxes OTHER than ad valorem taxes is a:
Special tax bond
Treasury notes are issued by the U.S. Government in:
book entry form in minimum denominations of $100
U.S. Treasury securities are subject to which of the following risks?
Purchasing Power Risk
Which of the following securities pays a rate of interest that is adjusted periodically to reflect the current interest rates for Treasury Securities?
Variable rate notes
An increasing market rate of interest would lead to:
Lower bond prices and higher bond yields
What is a benefit of a zero coupon bond?
Capital appreciation
A bond issue where the bonds have the same maturity but different dates of issuance is a:
Series bond offering
All of the following disclosures must be made to the customers who wish to purchase long-term negotiable certificates of deposit except:
A. Sale prior to maturity can result in a price that is lower than the original purchase amount
B. Trading in the secondary market is limited
C. Step-down CD yields may not reflect the actual market interest rate
D. These CDs are unconditionally backed by the FDIC but not SIPC


Correct Answer: D
The Federal Reserve would permit all of the following to be "primary" U.S. Government securities dealers EXCEPT:
A. Foreign broker-dealers
B. Thrift institutions
C. Commercial Banks
D. Domestic Broker-dealers


Correct answer: B
The term "Funded Debt" refers to which of the following issues?
Corporate debt with at least 5 years to maturity
Trades of all of the following will settle in Fed Funds EXCEPT:
A. Prime Banker's Acceptances
B. Treasury Bills
C. Treasury Bonds
D. Prime commercial paper


Correct answer: D
The nominal yield of a bond will:
Remain unchanged as bond prices fluctuate
Which statement is TRUE regarding Federal Funds?
Federal Funds are overnight loans between member institutions of the Federal Reserve System
All of the following statements are true regarding convertible bond issues except:
A. At the time of issuance, the conversion price is set at a premium to the stock's current market price
B. When stock price is at a premium to the conversion price, the conversion feature has intrinsic value
C. For the conversion feature to have value, the stock's price must move up in the market after issuance
D. Convertible bonds usually have higher yields than bonds without the conversion feature


Correct answer: D
All of the following trade flat except:
A. Treasury Bills
B. Treasury STRIPS
C. Treasury Bonds
D. Treasury Receipts


Correct answer: Treasury receipts
A transit authority is issuing moral obligation bonds with backing from the state. What statement is TRUE concerning this bond issue?
The bonds are secured by the revenues from the financed project, and if this is insufficient, ultimately payment occurs if the state where the project is constructed apportions the funds to service the debt
A bond counsel would render a qualified legal opinion in which of the following circumstances?
After examining the city property records, it appears that the clear title cannot be given to land on which a proposed facility is to be built
All of the following statements are true regarding repurchase or reverse repurchase agreements except:
A. Under a reverse repurchase agreement, the dealer is buying securities from the federal reserve
B. If a repurchase agreement extends for longer than overnight, the agreement is known as a "Due Bill" repurchase agreement
C. Repurchase agreements are used by dealers to reduce the carrying cost of Government Securities held in their inventory
D. Repurchase agreements are initiated by the Federal Reserve to loosen the money supply


Correct answer: B
What is not a risk of investing in a GNMA?
A. Receiving principal payments earlier than expected in a declining interest rate environment
B. Reinvestment of payments received in a declining interest rate environment
C. Receiving principal payments later than expected in a rising interest rate environment
D. Fluctuating principal value due to interest rate movements


Correct answer: D
The trust indenture is a contract between the:
Issuer and trustee
All of the following statements are true regarding the Federal Funds rate EXCEPT the rate is:
A. Charged from one federal reserve member bank to another member bank
B. set by the federal reserve
C. Lower than the discount rate
D. Computed every business day


Correct answer: B
Which statement is true about Certificate of Participation (COP)?
COPS are considered to be backed by a revenue pledge and payments to security holders are not contingent on the governing body making an annual appropriation from budgeted funds
The lowest investment grade rating is:
BBB
All of the following are significant investment features of the purchaser of municipal bonds EXCEPT:
A. Maturities and issues may be diversified
B. Insured issues are available for customers wishing minimum credit risk
C. Interest is currently state and local tax exempt
D. Interest is currently federal tax exempt
An investor is most likely to put a bond with a tender option at par when interest rates are:
Rising
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. If a customer buys 5 T-notes on Friday, April 4th, when does the settlement occur?
Monday, April 7th
A municipality would issue a GAN in anticipation of receiving:
Federal transit funding
Series EE bonds:
Pay interest at redemption
In a period of steep decreases in interest rates, which issuer is most likely to be positively affected?
Public Utility
A customer wishes to buy a $50,000 certificate of deposit offered by your firm. The customer wishes to know if the CD is FDIC insured. As the broker handling the account you should tell the customer that:
As long as the CD is titled in the customer's name and the customer does not have accounts at the issuing bank totaling more than $200,000, then the CD is FDIC insured
Which statement is TRUE about bond price changes that result from interest rate movements?
Short term bond prices move more slowly than long term bond prices
If a corporation reports a loss for a year, it is obligated to make interest payments on all of the following bonds EXCEPT:
A. Non-callable bonds
B. Equipment trust certificates
C. Income bonds
D. Non-convertible bonds
A corporation has issued $10,000,000 of 71/4%, 20 year, $1,000 par, convertible debentures, convertible at a ration of 25:1. The bond is currently trading at 101, while the company's common stock is at 38. The conversion price per share is:
$40
A short term corporate debt which is backed solely by the full faith and credit of the issuer is:
Commercial paper
For bonds trading at a discount which yield would be the lowest?
Nominal
A "blue chip" corporation experiencing a short term cash flow shortage could issue:
Commercial paper
All of the following are money market instruments EXCEPT:
A. REPOs (Repurchase agreements)
B. ADRs (American Depository Receipts)
C. CDs (Certificates of Deposit)
D. BAs (Banker's Acceptances)


Correct answer: B
Which of the following investments gives a rate of return that cannot be affected by "reinvestment risk"
Treasury STRIPS
100 Basis Points equals:
1%
All of the following statements are true regarding equipment trust certificates (ETCs) EXCEPT:
A. Equipment trust certificates are secured by specified corporate assets
B. ETCs are considered poor credit risks
C. Equipment trust certificates are commonly issued by transportation companies
D. Equipment trust certificates are issued in serial maturities


Correct answer: B
To smooth out tax collections, a municipality will issue a:
TAN
Which statement is TRUE regarding the trading of government and agency bonds?
The trading market is active and issues are quoted by dealers in minimum increments of 1/32nds
A customer has bought a "book entry" bond which pays interest semi-annually. The customer will receive interest payments:
From the paying agent twice a year
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