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Series 7 > Chapters 11&12 > Flashcards

Chapters 11&12 Flashcards

Municipal Securities

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Series 7 Top-off Exam flashcards
1
Q

Undivided Syndicate

A

Eastern Account

-Each member takes some of the unsold bonds (same percentage as the original allocation)

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2
Q

Divided Syndicate

A

Western Account

-Members only responsible for their individual allocation

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3
Q

Components of the spread

A
  1. Manager’s fee= administration
  2. Additional takedown= risk
  3. Concession= selling

** Syndicate member’s compensation= additional takedown plus concession (also names total takedown)

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4
Q

After issuance, where do muni bonds trade?

A

OTC market

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5
Q

20 Bond Index

A
  • 20 G.O. bonds with 20 year maturities

- Average rating AA or A2

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6
Q

11 Bond Index

A
  • Take 11 of the original 20
  • Average rating of AA+ or Aa1
  • Higher ratings, so lower IR
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7
Q

25 Revenue Bond Index

A
  • 25 Revenue bonds with 30 year maturities

- Average rating A+ or A1

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8
Q

Where does enforcement come from for broker-dealers?

A

FINRA

SEC

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9
Q

Where does enforcement come from for bank dealers?

A

Comptroller of the Currency
FRB
FDIC

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10
Q

What requirements much be satisfied to issues GO bonds?

A
  1. Voter approval, since it is uses tax dollars to repay the debts
  2. Debt Ceiling Limitations
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11
Q

What requirement must be satisfied to issue revenue bonds?

A

Feasibility Study

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12
Q

How are municipal issues typically sold from a syndicate stand point?

A

Firm-commitment basis

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13
Q

Priority of Orders

A
  1. Presale Orders
  2. Group Net Orders
  3. Designated Orders
  4. Member Orders

Syndicate manager can change priority of orders if in the best interest of syndicate

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14
Q

Notice of Sale

A
  • When an issuers intends to sell bonds through a competitive sale, will advertise through NoS
  • includes size offering, maturity date, coupon rate, and details related to bidding process
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15
Q

Legal of Opinion

A

EVERY MUNI BOND MUST BE ISSUED WITH THIS

-written by bond counsel that is hired by issuer to attest to the validity and tax exempt status of the bond issue

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16
Q

Official Statement

A

The disclosure document

  • contains info about issuer ad offering
  • must be distributed to investors if it is produced
  • has a preliminary and final version
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17
Q

EMMA

A

Electronic Municipal Market Access

MSRB’s dataport where muni bond underwriters and issuers submit specific documents

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18
Q

Municipal Bond Dealers and Traders

A
  • Engage in position trading (a process where they commit capital)
  • may also be asked to appraise or evaluate and issue
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19
Q

Broker’s Broker

A

Assist another firm in buying or selling bonds in the secondary market

  • Deals only with other brokerage firms and banks
  • do NOT underwrite new issues
  • receives commissions
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20
Q

What will bonds selling at a discount be priced?

A

Priced to maturity

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21
Q

What will bonds selling at a premium (and callable at par) be priced?

A

Priced to call

22
Q

What will bonds selling at a premium (and callable at a premium) be priced?

A

Priced to maturity or to call, whichever is lower

23
Q

Accrued Interest Calculation

A

Calculated from the last coupon date up to, but not including the settlement date

  • T+2 for settlement
  • 30 days in every month
  • 360 days in the year
24
Q

The Bond Buyer

A

Online newspaper of the muni industry that contains news that is pertinent to both the muni market and the financial community

25
Q

Visible Supply

A

Gives an indication of the supply side of the market

  • computed on a daily basis
  • total dollar amount of all muni’s being underwritten that are expected to reach the market over the next 30 days
  • included are issues that are due to mature in 13 months or more
26
Q

Bond Buyer Placement Ratio

A
  • Offerings much be 1 million or more
  • demand side of the market
  • weekly basis (end of friday)
  • dollar amount sold compared to issued over the week
27
Q

Firm Quotes

A

Used to indicate definite prices for either a seller or a bidder

28
Q

Confirmations for muni bond must be sent to a customer when?

A

At or before the completion of the transaction

29
Q

Bond Buyer’s Municipal Bond Index is based on:

A

The average prices of 40 LT muni bonds adjusted to a yield of 6%

30
Q

What party states that a muni bond may legally issue bonds?

A

The issuer’s bond counsel

31
Q

A bond counsel renders an “unqualified legal opinion” if…

A

there are not limitations or pending lawsuits that hinder the issuance of bonds

32
Q

When would the delivery of a mutilated certificate be considered good delivery?

A

If the certificate is authenticated by the issuer or transfer agent

33
Q

Basis is also called

A

Yield to Maturity

34
Q

When would the federal tax exemption for interest earned on an industrial revenue bond not be available?

A

When the holder of the bond is a substantial user of the facility

35
Q

Private Activity Bond

A
  • Type of muni bond in which the funds being raised will be used to benefit a private company
  • if person receiving interest payment is subject to AMT, interest is taxable at the federal level
  • least suitable to a client who is subject to AMT
36
Q

Is a moral obligation bond LT or ST

A

LT

37
Q

Accrued Interest Formula

A

(Principal X Rate X Days of interest)/360

38
Q

Tax anticipation notes are used to

A

Meet Operational Expenditures

39
Q

Bond Anticipation Notes

A

A muni borrowing for short term period to finance capital project

40
Q

Special Assessment Bond

A

Used to finance the construction of water and sewer systems, sidewalks, and streets

-interest paid is derived from charges on benefited property

41
Q

Main considerations when analyzing the credit risk of an issuer of a GO bond

A
  • diversification of economic activity
  • budgetary pictures and legislative climate
  • pending litigation against the issuer
42
Q

Special Tax Bond

A

Type of revenue bond usually financed by tax on certain items such as cigarettes, liquor, or gasoline

43
Q

Net Revenue Pledge Bond

A

From: Gross Revenue
1st comes: Maintenance and operation
Leaving: Net Revenue
From which we pay: Debt service

  • Lower bond rating
  • higher coupon
44
Q

Gross Revenue Pledge Bond

A

From: Gross Revenue
1st comes: debt service
From whats left we pay: maintenance and operation

  • higher bond rating
  • lower coupn
45
Q

Overlapping debt

A

the debt of other districts that the residents of a particular muni district may be responsible for

46
Q

Double Barreled Security

A

a muni security that can be paid from the revenues of a project and is also a G. O. of a muni governement

47
Q

Reasons for a bond swap

A

to change the coupon, maturity, quality or rating, and for tax purposes

48
Q

GAN-Grant Anticipation Note is paid from

A

funding provided by the federal government

49
Q

BAN- Bond anticipation note is paid from

A

the proceeds from the issuance of LT bonds

50
Q

RAN- Revenue anticipation note

A

paid from the revenues to be received at a future date

51
Q

TAN- tax anticipation note

A

paid from future tax receipts, such as property 9ad valorem taxes)

Series 7 (7 decks)

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