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Series 7 > Unit 6 > Flashcards

Unit 6 Flashcards

1
Q

A debt security issues by a municipal authority to raise funds for new construction with the understanding that the finished structure will be rented to the authority and the rental payments will finance the bond payments

A

Lease rental bond

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2
Q

An attorney retained by a municipal issuer to give an opinion concerning the legality and tax exempt status of a municipal issue

A

Bond counsel

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3
Q

A short term municipal or government debt security to be paid off from future tax receipts

A

TAN (Tax Anticipation Note)

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4
Q

A municipal security backed by the full faith and credit of the issuing municipality as well as by pledged revenues

Taxed twice

A

Double barreled bonds

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5
Q

A self regulatory organization that adopts rules with regard to the unique municipal bond market covering professional qualifications, fair practices, uniform practice and market transparency and places administrative burdens on brokers and dealers

A

Municipal securities rule making board
(MSRB)

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6
Q

An offer from a broker dealer to buy or sell securities

It indicates a willingness to execute a trade under the terms and conditions accompanying the quote

A

Bona Fide quote

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7
Q

The price at which a municipal securities dealer is willing to purchase securities from another municipal dealer. The price may be revised if market conditions change

A

Workable indication

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8
Q

A series quotation subject to some condition requiring confirmation by the dealer

A

Subject quote

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9
Q

Tax equivalent yield calculation

A

Nominal yield ➗ 1 - fed tax income rate

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10
Q

A municipal issuers proportionate share of the debt of other local governmental units that overlap it geographically, either in whole or in part

A

Overlapping debt

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11
Q

Tax free municipal equivalent calculation (corporate vs. tax free municipal)

A

Corporate X (100% - tax bracket)

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12
Q

A short term municipal debt security issues in anticipation of revenue to be received

A

RAN (revenue anticipation note)

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13
Q

A short term municipal debt security to be paid from the proceeds of long term debt when it is issued

A

BAN (bond anticipation note)

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14
Q

A term used to describe municipal entities that share the same boundaries.

Ex: a school district and fire district may issue debt separately although the debt is backed by revenues from the same tax payers

A

Coterminous

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15
Q

The statement of a bond attorney affirming the validity of a new municipal bond issue but expressing reservations about its quality

A

Qualified legal opinion

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16
Q

The statement of a bond counsel affirming the compliance of a new municipal bond issue with municipal statutes and tax regulations and expressing no reservations about its validity

A

Unqualified legal opinion

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17
Q
  1. A municipal securities broker acting as an agent or risk less principal in the purchase or sale of securities for broker dealers, sophisticated municipal securities professionals and institutions when those market participants are seeking liquidity or to adjust an inventory position
  2. A designated market maker executing orders for a commission house broker or another brokerage firm
  3. A floor broker on an exchange or a broker dealer in the over the counter market executing a trade as an agent for another broker
A

Brokers broker

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18
Q

A municipal issue that trades without a written legal opinion of counsel from a bond attorney

Must be designated at time of trade

A

Ex legal

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19
Q

Municipal revenue bonds that are quoted and traded on a basis of dollars rather than yield to maturity

Ex: term bonds

A

Dollar bonds

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20
Q

A municipal revenue bond payable only from the proceeds of a tax on certain items rather than ad valorem tax

A

Special tax bond

21
Q

A short term municipal debt security issues in anticipation of receiving a funding grant, typically from a government agency.

A

GAN (grant anticipation note)

22
Q

Issued by municipalities, non profit hospital, utilities, housing finance agencies and universities.

Long term variable rate bonds tied to short term interest rates

A

Auction rate securities (ARS)

23
Q

A municipal debt issue whose interest and principal are payable only from the specific earnings of an income producing public project.

Not subject to statutory debt limits and do not require voter approval

A

Revenue bonds

24
Q

A short term municipal debt security that provides interim financing for new projects

A

Construction loan note (CLN)

25
Q

A provision of a bonds trust indenture allowing the issuer to use the same collateral backing for a bond as collateral for future bond issues, resulting in new creditors having equal claim with existing creditors

A

Open end covenant

26
Q

A date on which interest on a new bond issue begins to accrue- usually the issue date although the bonds may be delivered at a later date

A

Dated date

27
Q

An account established by an issuing corporation or municipality into which money is deposited regularly so that the issuer has the funds to redeem its bonds, debentures or preferred stock

A

Sinking fund

28
Q

A provision of a municipal revenue bonds trust indenture that helps ensure the safety of the issue by promising to insure the facilities built

A

Insurance covenant

29
Q

The flow of funds arrangement in a municipal revenue bond pledging that operating and maintenance expenses will be paid before debt service

A

Net revenue pledge

30
Q

A provision of a bonds trust indenture stating that any additional bonds secured by the same assets must have a subordinates claim to those assets

A

Closed end covenant

31
Q

A municipal revenue bond funded by assessments only placed on property owners who benefit from the services or improvements provided by the proceeds of the bond issue

A

Special assessment bond

32
Q

A provision of a municipal revenue bonds trust indenture that helps ensure the safety of the issue by specifying the rates to charge the user of the facility

A

Rate covenant

33
Q

A short term municipal debt security to be paid off from future tax receipts and revenues

A

TRAN (tax and revenue anticipation note)

34
Q

Capital gain or loss calculation

A

Amount received(at sale or maturity) - adjusted basis

35
Q

A municipal debt issue backed by the full faith and credit and taxing power of the issuer for payment of interest and principal.

Issued by local governments are backed by ad valorem taxes, license fees.

Issued by states are backed by income taxes, license fees and sales taxes

Frequently require voter approval

A

General obligation bonds (GO Bonds)

36
Q

Accretion calculation

A

Discount➗# of years = adjustment per year

37
Q

Municipal bonds issued with variable or floating rates of interest. These securities offer interest payments tied to the movements of another specified interest rate

A

Variable rate demand obligation (VRDO)

38
Q

The flow of funds arrangement in a municipal revenue bond issue pledging that all revenues received will be used for debt service prior to deductions for any costs or expenses

A

Gross revenue pledge

39
Q

A debt security issues at a discount from face value. The discount is accreted annually for the purpose of calculating cost basis

A

Original issue discount bond (OID)

40
Q

A municipal revenue bond for which a state legislature has the authority but no legal obligation to appropriate money in the event that municipal issuer defaults

A

Moral obligation bonds

41
Q

Amortization calculation

A

Premium ➗ # of years = adjustment per year

42
Q

An alternative tax computing that adds certain tax preference items back into adjusted gross income. If it is higher than the regular tax liability for the year, the regular tax and the amount by which it exceeds the regular tax are paid

A

Alternative minimum tax (AMT)

43
Q

A provision of a municipal revenue bonds trust indenture that helps ensure the safety of the issue by promising to keep the facility and equipment in good working order

A

Maintenance covenant

44
Q

An element of income that receives favorable tax treatment. The item must be added to taxable income when computing AMT. includes accelerated depreciation on property, research, and development costs, intangible drilling costs, tax exempt interest on municipal private purpose bonds and certain incentive stock options

A

Tax preference item

45
Q

A general obligation municipal debt security issued by a municipality whose taxing power is limited to a specified maximum rate (more risky)

Ex: income tax

A

Limited Tax GO

46
Q

The schedule of payments disbursed from the proceeds of a facility financed by a revenue bond.

Determines the order in which the operating expenses, debt service and other expenses are paid

A

Flow of funds

47
Q

The redemption of a bond by an issuer owing to disaster.

Ex: a power plant built with proceeds from an issue is destroyed by a hurricane

A

Catastrophe clause

48
Q

In general, securities issued by a state local government or development agency used to finance the construction or purchase of industrial, commercial or manufacturing facilities that are to be purchased by or leased to a private user

A

Industrial development revenue bond (IDB)

49
Q

Issued by municipalities under the American recovery and reinvestment act of 2009, they make interest payments that are taxable to bond holders.

Some types offer tax credits to the issuer and others offer tax credits to the bond holder

No longer issued by those previously issued are actively traded

A

Build America bonds (BAB)

Series 7 (12 decks)

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