Gov Debt

Question 1

T-Bill

Answer 1

Discount security, zero accrued int, weekly auction, settles THURSDAY

Question 2

T-Note, T-Bond

Answer 2

2-10yrs, >10yrs, accrued i = actual / 365, periodic auction

Question 3

Non competitive bid

Answer 3

Placed by public, indicate quantity only, agree to pay lowest price (highest yield) of accepted bids, orders filled first

Question 4

T-Notes, Bonds and Agency Securities Pricing

Answer 4

Percentage of par and fraction 1/32 (is decimals)

Question 5

T-Bill Pricing

Answer 5

Based on YIELD (so higher yield is bid and lower yield is ask)

Question 6

TIPS

Answer 6

Principal is adjusted for inflation and coupon is based on fluctuating principal, principal adjustments are taxed as ordinary income in year adjustments made

Question 7

Government Mortgage Backed Securities

Answer 7

GNMA is SAFEST bc government backed. FNMA and FHLMC are also mortgage backed but not gov backed. All GSEs accrue at 30/360. Quote in 32nds.

Question 8

CMO Retail Communications

Answer 8

Must offer educational material, no comp to any other investment, preapproved by a principal and filed with FINRA WITHIN 10 business days of first use

Question 9

CMOs

Answer 9

Divides mortgage pools (GNMA, FNMA, FHLMC, not SLMA) into various tranches. Helps manage pre-payment risk. Sequential pay by tranche.

Question 10

CMO: Planned Amortization Tranche (PAC)

Answer 10

Most predictable cash flow and maturity.

Question 11

CMO: Support or Companion Tranche

Answer 11

Least predictable cash flow and maturity.

Question 12

CMO: Z-Tranche

Answer 12

Last tranche to receive payments.