Review Q's

Question 1

What is Funded Debt?

Answer 1

CORPORATE debt considered part of a company’s permanent long term funding.

Question 2

What are some features of Step-Down Certificates

Answer 2

Initial payments are made at an interest rate that is above the market rate
At a predetermined time, the interest rate is decreased to a rate that is at, or below, the market.

Question 3

Stocks listed on the NYSE typically also trade on the NYSE also can trade on the _____?

Answer 3

Chicago Midwest Stock Exchange

Question 4

Who would be most likely to purchase STRIPS?

Answer 4

Pension Fund

Question 5

Overnight Repo’s

Answer 5

Seller loses control of the underlying securities for the duration of the agreement
Interest rate charged is most similar to the fed funds rate
The investment has interest rate risk
The investment has no liquidity risk

Question 6

The nominal yield of a bond will

Answer 6

Increase as bond prices fall, and decrease as bond prices rise

Question 7

Principal advantage of a Variable Rate Municipal Note is:

Answer 7

The Market Rate can be expected to remain fairly stable

Question 8

What is true of adjustment (income) bonds?

Answer 8

Semi-annual payment of interest is not assured
AND
Repayment of principal at maturity is not assured

Question 9

What is true of short term CD’s?

Answer 9

Trading occurs in the secondary market, they are issued by banks typically in 100k denominations. They are non-callable and trade in the secondary market.

Question 10

How many days do treasury bonds pay accrued interest?

Answer 10

Actual day/Actual month - up to but not including the settlement date.

Question 11

What is the yield to maturity on a premium bond?

Answer 11

Stated interest rate - annual capital loss /bond average value

Question 12

What must be disclosed or available on an agency confirmation?

Answer 12

The remuneration earned by the firm in the transactions
The time of transaction
& The identity of the other part in the transaction

Question 13

Which Risks apply to GNMA pass thru certs?

Answer 13

Purchasing power risk
Risk of early prepayment
Risk of loss of principal if interest rates rise

Question 14

IF a customer hold a preferred stock and the company pays a common dividend what does the holder of the preferred stock receive?

Answer 14

They will keep the same amount of shared that they have in preferred stock and receive NO common dividend shares because they hold preferred stock NOT common!

Question 15

What type of order is reduced on the ex date is an open _____?

Answer 15

Buy Limit Order

Question 16

What would a customer purchase to protect a gain on a short stock position?

Answer 16

A Buy stop order - to avoid losing the gain on the short stock position

Question 17

T-bills cannot be collateral for Treasury Receipts because…..

Answer 17

The maturity of a T-bill is too short.

Question 18

Who are considered “creditors” of a corporation?

Answer 18

Convertible bondholders and non-convertible bondholders

Question 19

Preferred stock has all of these features compared to common stock:

Answer 19

Fixed rate of return
Priority claim to dividends declared
Priority claim to assets upon dissolution

Preferred does NOT Have a fixed maturity - nor even a stated maturity

Question 20

REIT’s are organized at what type of investment?

Answer 20

TRUST

Question 21

Do warrants and right pay dividends?

Answer 21

NOOOO

Question 22

Max 12b-1 fee

Answer 22

.75%