Debt Instruments Quiz Flashcards
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?
As valorem tax collections
Fines
Assessments of additional taxes
Collected back due as valorem taxes
Which of the following statements is true about a municipal dealer who has an out firm quote from another municipal dealer?
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
On a discount bond which of the following lists is correct from lowest to highest yield?
Nominal yield, current yield, yield to maturity
Which of the following statements is true when a bond is trading at a premium?
Nominal yield is the highest yield
Which of the following instruments trades on a discount yield basis?
Treasury bills
Which of the following is an example of an unsecured corporate bond?
Debenture
If a bond is bought at a discount the yield to maturity is
Higher than the nominal yield
Unsecured corporate debt offerings are declined as
Debentures
Where can retail investors find information on municipal bond issuers?
EMMA
When comparing two similar bonds
The unsecured bonds yield will be higher than the secured bond
A portfolio manager purchases a bond on a yield to call basis. This bond was trading at
A premium
Assuming that a bond is purchased at a discount
Current yield is less than YTM
Nominal yield or stated rate is less than YTC
The term double barreled is used to refer to which of the following?
Certain municipal bonds where a taxing authority guarantees debt service payments in the event that pledged revenues are insufficient
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
Treasury Bill
Overlapping debt includes which of the following?
School district
Which of the following best describes a workable indication from a dealer?
An estimate
The key difference between a T-Note and a T-Bond is
T-Notes are issued with maturities of less than 10 years
Which of the following is true about treasury bills?
They are issued in book entry form
A municipal dealer has bonds put firm to another dealer.
The bonds are tied up for a specified period of time
The dealer is locked into a quote
Which of the following best describes a double barreled bond?
General obligation
On a discount bond which of the following correctly states highest to lowest yield?
Yield to maturity, current yield, nominal yield
Which of the following needs voter approval?
GO
Which of the following issues equipment trust certificates?
A regional airline
A city and county are coterminous. When evaluating the debt issue of the city the debt of the county would be considered
Overlapping debt
Which of the following corporate bonds is secured by real estate?
Mortgage bond
If a bond is bought at a discount the yield to maturity is
Higher than the nominal yield
Treasury bills are quoted
On a discount yield basis
The last quotation of a US government bond is 98.08. An investor purchasing the bond would pay
$982.50
All of the following statements concerning T-Bills are true
Minimum denomination is $1,000
Quoted on a discounted yield basis
Are sold by means of periodic auction
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?
Treasury bills
Most debt issuers have provisions that allow them to retire the debt prior to maturity. These are known as
Call features
Which of the following are issued with a specified fixed rate of interest?
US government bonds and notes
To determine the current yield of a bond
Divide the annualized dollar yield by the current market value
The best definition of current yield is
The most recent annualized dollar amount of income divided by the security’s current market value and expressed as a percentage
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
Yield to maturity
Which one of the following securities is traded and quoted at a discount?
US treasury bills
Which of the following would issue overlapping debt?
Water district
Library district
School district
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?
Call premium value
Assuming a face value of $1,000 a 10% bond quoted at 820 has a current yield of
12.2%
US treasury bills have all of the following features
Ownership is evidence by book entry rather than a certificate
Maturity is one year or less
Issued at a discount
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?
The investor would have yield on the bond based on the call premium at the time that the bond is called
Mortgage backed issues are considered to be safe instruments. Which statement is correct concerning these securities?
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
A bond that sells above par is known as a premium bond. Which of the following statements are true?
Nominal yield is the highest yield
A US government bond quoted at 94.20-95.08 has a bid price of
$946.25
An investment with a stated interest rate that matures in 2 to 10 years is a
Treasury note
Which of the following is a secured bond?
Collateral trust certificate
Mortgage bond
Equipment trust certificate
Tips are issued in which of the following maturities?
5 year
10 year
30 year
The lowest yielding CMO tranche is the
PAC
A debenture is an example of a
Unsecured bond
