Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 7 > Municipal Securities > Flashcards

Municipal Securities Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

Definition of municipal securities.

A

Bonds issued by state or local government.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the usual denomination of a muni?

A

$5000 and $1000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the issuance period range for muni’s?

A

1/40 years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the three types of maturities for muni’s?

A

Term, Serial, Serial w/ balloon

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

This maturity is when the entire issue matures at the same time. Quoted as a price or % of par.

A

Term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

This maturity is when the issue matures over a period of several years. It is usually for projects with more predictable revenues.

A

Serial.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

This maturity is a hybrid of term and serial, with most issues maturing within a single year.

A

Serial w/ balloon

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

As with other bonds, dollar price and yield move in opposite directions, so it is ______ that matters most.

A

Yield.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A bond trading at a premium to par value is yielding a higher/lower interest rate?

A

Lower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Discounts will raise/lower effective yield?

A

Raise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the point of investing in muni’s?

A

The coupon interest is tax exempt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Quoted yields for muni’s tends to be higher/lower than those of corporate and government bonds.

A

Lower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

If a client is in a high tax bracket, the taxable equivalent yield on muni’s can be much higher/lower than on fully taxable securities?

A

Higher.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the exception to the rule on higher yields for high tax bracket clients?

A

Alternative Minimum tax will override tax benefits of muni’s for those that fund private activity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When can triple tax exemptions occur for muni’s?

A

When the client buys debt from the state that he/she lives in, they will also be exempt at state and local level.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Muni’s tend to offer higher/lower yields than other taxable securities.

A

Lower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Definition of yield to maturity.

A

Interest that an investor receives from the time the bond is purchased until maturity, plus gains/losses from purchasing bond at a premium or discount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are the three main classes of long-term muni’s.

A
  1. General Obligation Bonds
  2. Revenue Bonds
  3. Industry Development Revenue Bonds
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

These types of muni’s are secured by the full faith, credit, and taxing power of the issuer.

A

General Obligation Bonds

20
Q

These types of muni’s are secured by the full pledge of profits from the projects they fund.

A

Revenue Bonds

21
Q

These types of muni’s are issued through a government agency on behalf of a private business.

A

Industrial Development Revenue Bonds.

22
Q

What are the two most common types of muni’s?

A

GO’s and Revenue bonds

23
Q

Which type of muni’s are NOT used at the federal level?

A

GO’s.

24
Q

What are the seven types of short term muni’s?

A
  1. Tax Anticipation Notes (TAN)
  2. Bond Anticipation Notes (BAN)
  3. Revenue Anticipation Notes (RAN)
  4. Project Notes (PNs)
  5. Construction Loan Notes (CLN)
  6. Demand Notes
  7. Tax Exempt Commercial Paper
  8. Grant Anticipation Notes (GAN)
25
Q

Definition of Tax Anticipation Notes.

A

Will be paid with funds from a tax levy.

26
Q

Definition of Bond Anticipation Notes.

A

Paid by longer term bond issues.

27
Q

Definition of Revenue Anticipation Notes.

A

Paid with funds from revenue from the projects they support.

28
Q

Provide money to undertake a project through a specific mile stone (ex. highway or housing units) or to finance several small projects.

A

Definition of Project Notes.

29
Q

Fund construction of housing projects and are repaid by permanent financing provided by bond proceeds or Ginnie Mae. .

A

Definition of Construction Loan Notes

30
Q

Feature periodic interest rate adjustments and give the investor the right to tender the instrument, to either the issuer or a designated party on a specified number of days notice at a price equal to face value plus accrued interest.

A

Definition of Demand Notes.

31
Q

Short term, unsecured debt of states and municipalities..

A

Tax Exempt Commercial paper

32
Q

This is repaid by revenues derived from taxation of a particular activity or asset.

A

Special tax bond.

33
Q

This is used to fund a development project such as a library. The interest owed to the lenders is paid by taxes levied on the community.

A

Special Assessment Bond.

34
Q

This bond not only gives investors the tax exemption benefits of a municipal bond, but provides an additional moral pledge of commitment against default.

A

Moral Obligation Bond.

35
Q

Structure under which new bonds are issued to repay an outstanding bond issue prior to its first call date.

A

Advance Refunding.

36
Q

GO with revenue backing AND taxing authority.

A

Double Barrel Bond

37
Q

Debt security whose return to the investor is subject to taxes at local, state, federal, or a combination of those levels.

A

Taxable bond

38
Q

Why would anyone want a taxable bond?

A

They return market rate as opposed to the lower return offered by tax-free bonds.

39
Q

This is issued at a dollar price less than par. The difference is treated as tax-exempt income if the bonds are held to maturity.

A

Original Issue Discount Bond

40
Q

With this bond the investor receives one payment at maturity equal to the principal invested plus compound interest at a stated yield.

A

Zero coupon bond

41
Q

Rates sufficient to pay expenses and debt service

A

Rate covenant

42
Q

Open Ended

A

Allows issues of bonds with same status and equal claims

43
Q

Close Ended

A

No further issue with equal lien

44
Q

Sinking Fund

A

Money in escrow to pay interest and principal obligations.

45
Q

Instead of a prospectus, municipal bonds issue an ___________________.

A

Official Statement.

Series 7 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions