Unit 13 - Fixed Income Securities Flashcards
What’s the minimum number of years must money be borrowed to be considered long-term debt?
Five Years
The terms of a bond or loan are outlined in which document?
An indenture
Bonds issued by state and local governments are called what?
Municipal bonds
What’s the frequency in which treasury notes and bonds pay interest?
Monthly | Quarterly | Semi-Annually | Annually
Semiannual
Treasury bills, notes and bonds mature at par value. What’s their quoted price at issuance?
A discount to par with no coupons attached
U.S Treasury Notes have intermediate maturities, with a maximum of how many years?
10 Years (Typically 2, 3, 5, 7 and 10 year maturities)
U.S Treasury Bonds typically have maturities between how many years?
10 and 30 years
TIPS are issued with what maturities?
5, 10 and 30 years
TIPS use what to adjust for inflation semi-annually?
The Consumer Price Index
Are gains from TIPS subject to taxes?
TIPS are subject to federal taxes only; the are exempt fro state and local taxes.
A debenture is issued based on what?
A) Credit of the Corporation; B) Pledge of Assets; C) Ability to Levy Taxes
A) Credit of the Corporation
What are the minimum ratings to be qualified as investment-grade debt?
BBB/Baa
Bonds rated BB/Ba or lower are commonly referred to as what?
Junk bonds or high-yield bonds
True or False: Zero coupon bonds DO NOT pay interest.
True - They do not pay interest and are issued at a discount to par.
What is “phantom income”?
When you purchase a zero coupon bond at a discount, you are taxed on the discount by dividing the discount to par by the total duration of the bond. The amount taxed each year is known as “phantom income”.
