Federal Government Securities Flashcards
An investor buys $40,000 of U.S. Treasury Bonds with a 9% coupon rate due 7/1/18 at 104. Which of the following would represent the annual income of the bonds?
[A] $3,500
[B] $3,600
[C] $3,744
[D] $4,000
[B] $3,600
Ch.13 Sec.2
An investor who recently purchased Treasury Bonds issued by the U.S. Government calls in with some questions. One of the questions is related to the frequency of interest payments. What should the RR tell the client?
[A] These bonds pay interest at maturity only, similar to zero-coupon bonds.
[B] These bonds pay interest semi-annually.
[C] These bonds pay interest quarterly.
[D] These bonds pay interest monthly.
[B] These bonds pay interest semi-annually.
U.S. Treasury Bonds and Notes pay interest semi-annually. Bills do not pay interest
Ch.13 Sec.2
Which of the following securities normally settle on a next business day basis?
I. U.S. Government Bonds
II. Option contracts
III. U.S. Government Note traded on a cash basis
IV. Municipal Bonds
[A] I and II
[B] III and IV
[C] I, II, and IV
[D] I, II, III, and IV
[A] I and II
U.S. Government Bond trades and options settle the next business day. Notes trade on a “cash” basis and would settle on the same day as trade date. Municipal bonds settle on the trade date plus two business days.
Ch.13 Sec.2
All of the following are characteristics of U.S. Treasury bills EXCEPT:
[A] They have maturities up to one year
[B] They trade at face value only
[C] They are issued in book entry form only
[D] They have a minimum denomination of $100
[B] They trade at face value only
T-bills are sold and traded at a discount not face value. The minimum denomination of a U.S. Treasury bill is $100. Book entry securities are not represented by a certificate.
Historically, the minimum was $1,000, but recently the number has been reduced to $100. We never know if they’ve updated all of the exam questions, so if you see $1,000 and $100, then choose the newer number of $100. If you see a question where the only viable answers is $1,000, we recommend going with $1,000.
Ch.13 Sec.2
Federal Farm Credit Systemwide Bonds provide funding for which of the following?
I. The Federal Land Banks
II. The Banks for Cooperatives
III. The Federal Intermediate Credit Banks
[A] I only
[B] II only
[C] II and III
[D] I, II and III
[D] I, II and III
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