Exam 5

Question 1

The senior syndicate manager of a new municipal bond offering is required to provide written disclosure to the other members of the syndicate all of the details regarding available information on designations that are paid to syndicate members and non-syndicate members within:

Answer 1

10 business days

Question 2

The price at which a municipal bond may be tendered to an issuer is established by the:

Answer 2

Holder

Question 3

Records concerning purchases and sales of municipal securities may be maintained on:

Answer 3

Either a trade date or a settlement date basis

Question 4

An individual purchases a 15-year new issue municipal bond at an offering price of $975. The $25 discount would be:

Answer 4

If a municipal bond is issued at a discount that does not exceed .25% of $1,000 ($2.50) times the number of years to maturity, the discount is ignored. In this situation, an amount less than $37.50 ($2.50 x 15) would qualify and, as a result, the $25 discount can be ignored.

Question 5

An investor purchases a municipal bond in the secondary market at 108 and holds it until it matures in 10 years. For tax purposes, the premium is:

Answer 5

Amortized and not considered a loss

Question 6

A syndicate receives designated orders and member orders at the takedown. According to the priority of orders, the syndicate would honor:

Answer 6

All of the designated orders first

Question 7

municipal bond that’s trading at a discount?

tax

Answer 7

Then, since it’s a discount bond, if it’s held to maturity, there will be appreciation. Despite it being a municipal bond, the appreciation is subject to taxation as ordinary income. Whenever a bond is trading at less than its par value, both its current yield and its yield-to-maturity are greater than its nominal yield or coupon rate.

Question 8

In a new municipal issue, what is a group order?

Answer 8

All members will benefit from the order