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Series 52 Group Share > FC CH 4 > Flashcards

FC CH 4 Flashcards

1
Q

What is the disclosure document, similar to a prospectus, that is used for municipal bonds?

A

Official Statement

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2
Q

What may a trader do to gauge a bond’s value in the market?

A

Appraise or evaluate various conditions

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3
Q

An Eastern account is also referred to as a(n) _________ account.

A

An Eastern account is also referred to as a(n) undivided account.

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4
Q

The Visible Supply figure indicates the number of municipals expected to reach the market within the next ____ days.

A

The Visible Supply figure indicates the number of municipals expected to reach the market within the next 30 days.

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5
Q

What type of confirmation will a person who buys bonds prior to issuance receive?

A

A when issued confirmation

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6
Q

What is the MSRB’s primary disclosure service for official statements and other related information?

A

The Electronic Municipal Market Access (EMMA) system

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7
Q

The 20 GO Bond Index is composed of ____ GO bonds with ____-year maturities.

A

The 20 GO Bond Index is composed of 20 GO bonds with 20-year maturities.

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8
Q

What is the difference between what the syndicate pays the issuer for the new issue and the public offering price?

A

The underwriting spread

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9
Q

Are serial or term bonds more likely to have a sinking fund?

A

Term bonds are more likely to have a sinking fund.

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10
Q

For bonds trading at a discount, the yield-to-________ must be disclosed.

A

For bonds trading at a discount, the yield-to-maturity must be disclosed.

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11
Q

True or False: Term bonds are quoted on a yield basis.

A

False. Term bonds are quoted on a dollar basis (% of par).

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12
Q

For bonds trading at a premium, usually the yield-to-______ must be disclosed.

A

For bonds trading at a premium, usually the yield-to-call must be disclosed.

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13
Q

Is the Placement Ratio compiled daily or weekly?

A

Weekly

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14
Q

How is the underwriter determined for a Negotiated Sale?

A

The issuer selects the underwriter it would like to work with, and they negotiate the offering terms.

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15
Q

Define down bid.

A

It is when the most recent bid is lower than the previous bid

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16
Q

The average rating for the 20 GO Bond Index is ____________.

A

he average rating for the 20 GO Bond Index is AA or Aa2.

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17
Q

True or False: The 11 GO Bond Index is composed of 11 of the 20 bonds in the 20 GO Bond Index.

A

True

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18
Q

True or False: An undivided underwriting account is also referred to as a Western account.

A

False. An undivided account is also referred to as an Eastern accoun

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19
Q

What provides an investor with the price at which bonds may be sold?

A

A workable indication

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20
Q

True or False: By participating in an underwriting, a firm is making an implied recommendation to purchase the security.

A

True

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21
Q

True or False: The Syndicate Letter is also referred to as the Agreement Among Underwriters.

A

True

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22
Q

True or False: In a Western account, any unsold bonds are reallocated.

A

False. In a Western account, any unsold bonds are retained by the syndicate member that was unable to sell them.

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23
Q

When the best bid and the best offer for a security are identical, the market is ______.

A

When the best bid and the best offer for a security are identical, the market is locked.

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24
Q

The ____ price is the price at which a security is being offered.

A

The list price is the price at which a security is being offered.

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25
Q

Name the three components of the spread for a bond offering.

A
  1. Manager’s fee 2. Additional takedown 3. Sales concession
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26
Q

The document underwriters submit to issuers when bidding on a competitive issue is called the ______________________.

A

The document underwriters submit to issuers when bidding on a competitive issue is called the Official Bid Form.

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27
Q

How is the underwriter determined for a Competitive Sale?

A

The issuer invites syndicates to bid on the issue, with the best bid (lowest interest cost) winning the competition.

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28
Q

____________ orders are given to a syndicate and identify two or more members (not all) to receive credit for the sale.

A

Designated orders are given to a syndicate and identify two or more members (not all) to receive credit for the sale.

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29
Q

What yield would be disclosed for a bond purchased at a discount?

A

Yield to maturity (YTM)

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30
Q

A brokerage firm that purchases for or sells from its own account is effecting a _________ trade.

A

A brokerage firm that purchases for or sells from its own account is effecting a principal trade.

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31
Q

True or False: The legal opinion addresses the creditworthiness of an issue.

A

False. Legal opinions address the legality (authority/validity) of the issue and the tax exemption of the interest.

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32
Q

What does the Placement Ratio indicate?

A

The number of bonds that were sold during the week compared to what was available for sale (the demand side)

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33
Q

True or False: A bond counsel provides comments on the investment merits of a bond.

A

False

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34
Q

The underwriting spread is also referred to as the __________.

A

The underwriting spread is also referred to as the production.

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35
Q

For a new municipal offering, what constitutes settlement?

A

The issuer delivering the bonds and the syndicate paying the issuer for the bonds

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36
Q

How often is the Bond Buyer Municipal Bond Index published?

A

Daily

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37
Q

True or False: Presale orders are helpful in determining the final bid price.

A

True

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38
Q

True or False: Underwriting fees may be passed on to the issuer and/or customers.

A

False. Syndicate members are required to pay the underwriting fees.

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39
Q

_________ orders are those in which only one member earns the total takedown.

A

Member orders are those in which only one member earns the total takedown.

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40
Q

True or False: Receiving a selling concession is considered a form of underwriting compensation.

A

True

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41
Q

Are Visible Supply figures compiled daily or weekly?

A

Daily

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42
Q

The offer is the price at which a customer may ____ a bond.

A

The offer is the price at which a customer may buy a bond.

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43
Q

Is it mandatory for a municipal issuer to prepare an Official Statement?

A

No, but if one has been prepared, the MSRB requires BDs to distribute it.

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44
Q

At bid submission, does Net Interest Cost (NIC) or True Interest Cost (TIC) take into account the time value of money?

A

True Interest Cost (TIC), also called the Canadian Method

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45
Q

Define cover bid.

A

The next best bid on a new issue or secondary market transaction

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46
Q

If a bond counsel has no concerns related to the new offering, the counsel may render an ______________ opinion.

A

If a bond counsel has no concerns related to the new offering, the counsel may render an unqualified opinion.

47
Q

$10,000 worth of bonds are due to mature in five years. Calculate the total number of bond years.

A

Ten $1,000 par bonds are outstanding and each has five years to maturity; therefore, there are 50 bond years (10 x 5).

48
Q

What is a swing coupon?

A

The coupon on a specific maturity that is adjusted to achieve the desired spread

49
Q

The index showing the average yield on 25 revenue bonds with 30-year maturities is called the ______________________.

A

The index showing the average yield on 25 revenue bonds with 30 year maturities is called the Revenue Bond Index.

50
Q

Where can Visible Supply figures and the Placement Ratio for municipals be found?

A

The Bond Buyer

51
Q

Municipal syndicate settlement occurs within ____ days of settlement with the issuer.

A

Municipal syndicate settlement occurs within 30 days of settlement with the issuer.

52
Q

Which DTCC service is designed to assist in the confirmation, clearing, and reporting of trades for new municipal bonds?

A

The New Issue Information Dissemination Service (NIIDS)

53
Q

Who prepares the official statement

A

The issuer

54
Q

How often are the components of the 20 Bond Index adjusted?

A

Weekly

55
Q

What advertises that municipal bonds are available and invites underwriters to bid on a new competitive issue?

A

Notice of Sale

56
Q

True or False: In a new municipal offering, a selling group member may be reallocated unsold bonds.

A

False. Selling group members assume no liability and do not receive any reallocation of unsold bonds.

57
Q

In a negotiated underwriting, what document binds members together?

A

The agreement among underwriters

58
Q

How often is the 11 GO Bond Index published?

A

Weekly

59
Q

The yield curve of the highest rated municipal bonds is referred to as the ____ curve.

A

The yield curve of the highest rated municipal bonds is referred to as the MMD curve.

60
Q

What service is used by firms wanting to underwrite municipal securities with maturities of greater than nine months?

A

The New Issue Information Dissemination Service (NIIDS)

61
Q

True or False: The bid is the price at which a customer may sell a bond.

A

True

62
Q

True or False: Syndicate managers may change the priority of orders if justifiable and in the syndicate’s best interest.

A

True

63
Q

Where can Notices of Sale be found?

A

In The Bond Buyer (The Daily Newspaper of Public Finance)

64
Q

A Notice of Sale is created by the ______.

A

A Notice of Sale is created by the issuer

65
Q

What orders are placed prior to the actual awarding of the issue to the syndicate?

A

Presale orders

66
Q

What yield would be disclosed for a bond purchased at a premium and callable at par?

A

Yield to call (YTC)

67
Q

Municipal bond traders generally engage in what type of trading?

A

Position trading

68
Q

True or False: General obligation bond issues require voter approval.

A

True

69
Q

A brokerage firm that assists a client in either buying or selling a security is effecting a(n) ______ trade.

A

A brokerage firm that assists a client in either buying or selling a security is effecting an agency trade.

70
Q

When does final settlement of a syndicate account occur?

A

Within 30 calendar days following the date the issuer delivers the bonds to the syndicate

71
Q

How often are the components of the 11 Bond Index adjusted?

A

Weekly

72
Q

True or False: Syndicate members may withdraw from participating due to a disagreement regarding the spread.

A

True

73
Q

Put the following four types of orders in the correct priority: Group Net, Member, Presale, Designated

A

1) Presale 2) Group Net 3) Designated 4) Member (Remember: P, G, D, M)

74
Q

Is the average credit rating of the Revenue Bond Index higher or lower than the GO Bond Indexes?

A

Lower; the average is A+/A1.

75
Q

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the ____________________.

A

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the sales concession.

76
Q

If the winning bid is 2.25 and the next best bid is 2.30, what is the cover bid?

A

5 basis points (2.30 - 2.25)

77
Q

Which yields does the MSRB considers to be most important in determining whether a bond’s price is fair and reasonable?

A

Yield-to-maturity or yield-to-call

78
Q

Is the average credit rating of the 11 GO Bond Index higher or lower than the 20 GO Bond Index?

A

Higher; the average is AA+/Aa1.

79
Q

What is the spread minus the manager’s fee?

A

The total takedown

80
Q

When is a member bound by the obligations of the syndicate?

A

Once it has signed and returned the syndicate letter to the manager

81
Q

Serial bonds are quoted on a ___________________ basis.

A

Serial bonds are quoted on a yield-to-maturity basis.

82
Q

How often is the 20 GO Bond Index published?

A

Weekly

83
Q

How often are the components of the Bond Buyer Municipal Bond Index adjusted?

A

Twice per month

84
Q

Orders that are received before the bid has been submitted are referred to as _______ orders.

A

Orders that are received before the bid has been submitted are referred to as presale orders

85
Q

Typically, how does the issuer determine the winning bid?

A

It is typically based on which provides the issuer with the lowest interest cost over the life of the bond.

86
Q

Municipal firms may choose to spread the risk on large positions by forming a _____ account.

A

Municipal firms may choose to spread the risk on large positions by forming a joint account.

87
Q

What is the benchmark for the SIFMA Index?

A

VRDOs with at least $10 million outstanding

88
Q

Identify the acronym: MMD

A

Municipal Market Data

89
Q

What is the Bond Buyer Municipal Bond Index?

A

An index that averages the prices of 40 recently issued, actively traded municipal bonds

90
Q

What would a member of the syndicate (not the manager) earn for selling bonds?

A

The total takedown

91
Q

A competitive underwriting provides the _____ flexibility when structuring a new issue.

A

A competitive underwriting provides the least flexibility when structuring a new issue.

92
Q

Who determines the final settlement date of a new municipal offering?

A

The issuer and the syndicate manager

93
Q

A new offering of bonds that trade prior to issuance and settlement are referred to as ___________ bonds.

A

A new offering of bonds that trade prior to issuance and settlement are referred to as when issued bonds.

94
Q

What is the document that establishes the agreement between the issuer and the underwriter?

A

Underwriting Agreement

95
Q

What three components are used to determine the bid in a municipal underwriting?

A

The pricing scale, underwriting spread, and interest rates

96
Q

When bidding on a new issue, what will underwriters first determine?

A

Reoffering Yield

97
Q

What information would the manager of a municipal underwriting provide in the Syndicate Letter?

A

Underwriting type (negotiated/competitive), amount, allocation, priority of orders, type of account (eastern/western)

98
Q

What yield would be disclosed for a bond purchased at a premium and callable at a premium?

A

The lower of the YTM or YTC

99
Q

Do MSRB rules require the disclosure of the yield-to-maturity or yield-to-call on a customer confirmation?

A

Yes. The lower of the two yields must be disclosed.

100
Q

Bonds retained by syndicate members for their own purposes are referred to as _________ bonds.

A

Bonds retained by syndicate members for their own purposes are referred to as retention bonds.

101
Q

True or False: An all-or-none order qualifier requires all of the bonds to be purchased.

A

True

102
Q

What type of order requires that all of the bonds be purchased immediately?

A

A fill-or-kill order

103
Q

True or False: In the Bond Buyer, the Visible Supply figure includes both municipal and corporate bonds.

A

False. The Visible Supply figure shows only municipal bonds that are being offered on a negotiated or competitive basis.

104
Q

List the priority of orders from first to fourth.

A
  1. Presale orders 2. Group net orders 3. Designated orders 4. Member orders
105
Q

Why will the manager prioritize orders for the purchase of bonds sold through the syndicate?

A

To give the maximum benefit to the entire syndicate as a group versus any one particular member

106
Q

Define one bond year.

A

A unit of $1,000 of debt that is outstanding for one year

107
Q

In a new municipal offering, who is responsible for determining the liability for any unsold bonds?

A

The syndicate manager determines the liability.

108
Q

In a competitive underwriting, the members are bound together by a ________________.

A

In a competitive underwriting, the members are bound together by a syndicate letter.

109
Q

What orders benefit the entire syndicate by percentage of liability?

A

Group net orders

110
Q

The total takedown is made up of ____________ + _____________.

A

The total takedown is made up of Additional takedown + Sales concession.

111
Q

The ___________________ has the authority to change the priority of orders.

A

The syndicate manager has the authority to change the priority of orders.

112
Q

When a bond is only offered in lots of specific numbers, it is being offered in _________.

A

When a bond is only offered in lots of specific numbers, it is being offered in multiples.

113
Q

What document describes the bidding procedures for a new municipal offering?

A

Notice of Sale

114
Q

A quote of 3.50 basis firm for one hour is given for bonds. The quote is referred to as ________.

A

A quote of 3.50 basis firm for one hour is given for bonds. The quote is referred to as out firm.

Series 52 Group Share (24 decks)

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