Debt Instruments Quiz

Question 1

A municipality has issued a double barreled revenue bond where the net revenues generated by the facility have proven to be insufficient to service the debt. Which of the following income sources may be used by the municipality to satisfy the obligation?

Answer 1

As valorem tax collections
Fines
Assessments of additional taxes
Collected back due as valorem taxes

Question 2

Which of the following statements is true about a municipal dealer who has an out firm quote from another municipal dealer?

Answer 2

The dealer has the right to buy the bonds at a fixed price for a certain period of time
The dealer can sell the bonds before buying them

Question 3

On a discount bond which of the following lists is correct from lowest to highest yield?

Answer 3

Nominal yield, current yield, yield to maturity

Question 4

Which of the following statements is true when a bond is trading at a premium?

Answer 4

Nominal yield is the highest yield

Question 5

Which of the following instruments trades on a discount yield basis?

Answer 5

Treasury bills

Question 6

Which of the following is an example of an unsecured corporate bond?

Answer 6

Debenture

Question 7

If a bond is bought at a discount the yield to maturity is

Answer 7

Higher than the nominal yield

Question 8

Unsecured corporate debt offerings are declined as

Answer 8

Debentures

Question 9

Where can retail investors find information on municipal bond issuers?

Answer 9

EMMA

Question 10

When comparing two similar bonds

Answer 10

The unsecured bonds yield will be higher than the secured bond

Question 11

A portfolio manager purchases a bond on a yield to call basis. This bond was trading at

Answer 11

A premium

Question 12

Assuming that a bond is purchased at a discount

Answer 12

Current yield is less than YTM

Nominal yield or stated rate is less than YTC

Question 13

The term double barreled is used to refer to which of the following?

Answer 13

Certain municipal bonds where a taxing authority guarantees debt service payments in the event that pledged revenues are insufficient

Question 14

Sam owns a security with a $10,000 face value that matures in 6 months and will pay interest only at maturity. The interest earned is not subject to state or local taxation. Sam owns a

Answer 14

Treasury Bill

Question 15

Overlapping debt includes which of the following?

Answer 15

School district

Question 16

Which of the following best describes a workable indication from a dealer?

Answer 16

An estimate

Question 17

The key difference between a T-Note and a T-Bond is

Answer 17

T-Notes are issued with maturities of less than 10 years

Question 18

Which of the following is true about treasury bills?

Answer 18

They are issued in book entry form

Question 19

A municipal dealer has bonds put firm to another dealer.

Answer 19

The bonds are tied up for a specified period of time

The dealer is locked into a quote

Question 20

Which of the following best describes a double barreled bond?

Answer 20

General obligation

Question 21

On a discount bond which of the following correctly states highest to lowest yield?

Answer 21

Yield to maturity, current yield, nominal yield

Question 22

Which of the following needs voter approval?

Answer 22

GO

Question 23

Which of the following issues equipment trust certificates?

Answer 23

A regional airline

Question 24

A city and county are coterminous. When evaluating the debt issue of the city the debt of the county would be considered

Answer 24

Overlapping debt

Question 25

Which of the following corporate bonds is secured by real estate?

Answer 25

Mortgage bond

Question 26

If a bond is bought at a discount the yield to maturity is

Answer 26

Higher than the nominal yield

Question 27

Treasury bills are quoted

Answer 27

On a discount yield basis

Question 28

The last quotation of a US government bond is 98.08. An investor purchasing the bond would pay

Answer 28

$982.50

Question 29

All of the following statements concerning T-Bills are true

Answer 29

Minimum denomination is $1,000
Quoted on a discounted yield basis
Are sold by means of periodic auction

Question 30

An investor anticipates interest rates to rise sharply over the next 2 years. Which investments below would allow the investor to profit on this belief with the least amount of risks?

Answer 30

Treasury bills

Question 31

Most debt issuers have provisions that allow them to retire the debt prior to maturity. These are known as

Answer 31

Call features

Question 32

Which of the following are issued with a specified fixed rate of interest?

Answer 32

US government bonds and notes

Question 33

To determine the current yield of a bond

Answer 33

Divide the annualized dollar yield by the current market value

Question 34

The best definition of current yield is

Answer 34

The most recent annualized dollar amount of income divided by the security’s current market value and expressed as a percentage

Question 35

If a bond investor wants to know the rate of return measuring the total performance on a bond held from purchase through maturity the investor should calculate the

Answer 35

Yield to maturity

Question 36

Which one of the following securities is traded and quoted at a discount?

Answer 36

US treasury bills

Question 37

Which of the following would issue overlapping debt?

Answer 37

Water district
Library district
School district

Question 38

An investor had a series of bonds in his portfolio called by the issuer. What value can he expect to receive for the bonds when he redeems them with the issuer?

Answer 38

Call premium value

Question 39

Assuming a face value of $1,000 a 10% bond quoted at 820 has a current yield of

Answer 39

12.2%

Question 40

US treasury bills have all of the following features

Answer 40

Ownership is evidence by book entry rather than a certificate
Maturity is one year or less
Issued at a discount

Question 41

An investor has some bonds that are callable. She is wondering what the yield on her bonds will be if they are in fact called by the issuer. Which of the following is true regarding this investors bonds?

Answer 41

The investor would have yield on the bond based on the call premium at the time that the bond is called

Question 42

Mortgage backed issues are considered to be safe instruments. Which statement is correct concerning these securities?

Answer 42

GNMA, FNMA and FHLMC will all hold FHA and VA loans in their portfolios.
Interest received is subject to federal state and local taxation
GNMA is a government owned corporation

Question 43

A bond that sells above par is known as a premium bond. Which of the following statements are true?

Answer 43

Nominal yield is the highest yield

Question 44

A US government bond quoted at 94.20-95.08 has a bid price of

Answer 44

$946.25

Question 45

An investment with a stated interest rate that matures in 2 to 10 years is a

Answer 45

Treasury note

Question 46

Which of the following is a secured bond?

Answer 46

Collateral trust certificate
Mortgage bond
Equipment trust certificate

Question 47

Tips are issued in which of the following maturities?

Answer 47

5 year
10 year
30 year

Question 48

The lowest yielding CMO tranche is the

Answer 48

PAC

Question 49

A debenture is an example of a

Answer 49

Unsecured bond