SERIES 65 CORRECT TEST PAPER QUESTIONS AND
ANSWERS SURE A+
✔✔Odd Lot Theory - ✔✔Theory that the ODD LOT investor who trades in less than
100-share quantities is usually wrong and that profits can be made by acting contrary to
odd-lot trading patterns.
✔✔US Treasury Bills - ✔✔•typically do not have regular coupon payments
•have maturities of up to a year.
•have very little default risk.
•have very little interest rate risk though have no stated interest rate '90 day risk free"
rate
✔✔US Treasury Notes - ✔✔-direct debt obligations of U.S. Treasury
-pay semi-annual interest
-mature at par value
-have maturities of 2, 3, 5, 7, and 10 years
✔✔US Treasury Bonds - ✔✔-direct debt obligations of the U.S. Treasury
-pay semi-annual interest
-maturities between 10-30 years
✔✔Treasury Inflation-Protected Securities (TIPS) - ✔✔Treasury issues in which the
principal amount is tied to the Consumer Price Index to protect the buyer against the
effects of inflation
✔✔Federal National Mortgage Association (FNMA) - ✔✔A publicly held corporation that
purchases conventional mortgages and mortgages from government agencies,
including the Federal Housing Administration, Department of Veterans Affairs, and
Federal Home Administration. Syn. Fannie Mae.
Interest paid semiannually and issued at par, subject to state and local taxes
, ✔✔Government National Mortgage Association (GNMA) - ✔✔A federal government
agency that promotes affordable housing by buying subsidized mortgages in the
secondary market. This agency also guarantees mortgage-backed securities issued by
private FHA and VA lenders.
Pass through, interest paid monthly, subject to state and local taxes
✔✔Equipment Trust Certificates - ✔✔bonds secured with factory and equipment as
collateral
✔✔Collateral Trust Bonds - ✔✔issued by corporations that own securities of other
companies as investments
✔✔Debenture - ✔✔a bond not backed by specific collateral
✔✔senior debt - ✔✔first priority to general assets
✔✔subordinated debt - ✔✔debt with an inferior claim (relative to senior debt) to venture
assets
✔✔General Obligation Bonds - ✔✔a municipal bond that is backed by the issuer's full
faith and credit or full taxing authority
✔✔Revenue Bonds - ✔✔investments secured by the revenue generated by a state or
municipal project
Yield higher than GO bond
✔✔investment grade bonds - ✔✔Bonds rated triple-B / Baa or higher; many banks and
other institutional investors are permitted by law to hold only investment-grade bonds
✔✔Yield Spread - ✔✔The difference between treasuries and corporate bond's yield.
Widens when economic conditions get worse; narrow in optimistic market
✔✔Eurobond - ✔✔bond denominated in a currency other than that of the country in
which it is sold
✔✔Eurodollar bonds - ✔✔any issuer except the US
Payable in US currency,
no currency risk for US investor
Rated by Us agencies,
Higher yields,
ANSWERS SURE A+
✔✔Odd Lot Theory - ✔✔Theory that the ODD LOT investor who trades in less than
100-share quantities is usually wrong and that profits can be made by acting contrary to
odd-lot trading patterns.
✔✔US Treasury Bills - ✔✔•typically do not have regular coupon payments
•have maturities of up to a year.
•have very little default risk.
•have very little interest rate risk though have no stated interest rate '90 day risk free"
rate
✔✔US Treasury Notes - ✔✔-direct debt obligations of U.S. Treasury
-pay semi-annual interest
-mature at par value
-have maturities of 2, 3, 5, 7, and 10 years
✔✔US Treasury Bonds - ✔✔-direct debt obligations of the U.S. Treasury
-pay semi-annual interest
-maturities between 10-30 years
✔✔Treasury Inflation-Protected Securities (TIPS) - ✔✔Treasury issues in which the
principal amount is tied to the Consumer Price Index to protect the buyer against the
effects of inflation
✔✔Federal National Mortgage Association (FNMA) - ✔✔A publicly held corporation that
purchases conventional mortgages and mortgages from government agencies,
including the Federal Housing Administration, Department of Veterans Affairs, and
Federal Home Administration. Syn. Fannie Mae.
Interest paid semiannually and issued at par, subject to state and local taxes
, ✔✔Government National Mortgage Association (GNMA) - ✔✔A federal government
agency that promotes affordable housing by buying subsidized mortgages in the
secondary market. This agency also guarantees mortgage-backed securities issued by
private FHA and VA lenders.
Pass through, interest paid monthly, subject to state and local taxes
✔✔Equipment Trust Certificates - ✔✔bonds secured with factory and equipment as
collateral
✔✔Collateral Trust Bonds - ✔✔issued by corporations that own securities of other
companies as investments
✔✔Debenture - ✔✔a bond not backed by specific collateral
✔✔senior debt - ✔✔first priority to general assets
✔✔subordinated debt - ✔✔debt with an inferior claim (relative to senior debt) to venture
assets
✔✔General Obligation Bonds - ✔✔a municipal bond that is backed by the issuer's full
faith and credit or full taxing authority
✔✔Revenue Bonds - ✔✔investments secured by the revenue generated by a state or
municipal project
Yield higher than GO bond
✔✔investment grade bonds - ✔✔Bonds rated triple-B / Baa or higher; many banks and
other institutional investors are permitted by law to hold only investment-grade bonds
✔✔Yield Spread - ✔✔The difference between treasuries and corporate bond's yield.
Widens when economic conditions get worse; narrow in optimistic market
✔✔Eurobond - ✔✔bond denominated in a currency other than that of the country in
which it is sold
✔✔Eurodollar bonds - ✔✔any issuer except the US
Payable in US currency,
no currency risk for US investor
Rated by Us agencies,
Higher yields,
