FINRA SIE FINAL EXAM ACTUAL QUESTIONS AND
SOLUTIONS RATED A+
✔✔A corporation issued a 7% AA sinking fund debenture at par. Three years later,
similar issues are being issues at 8%. Which of the following is true about the
outstanding 7% issue? How does the current yield relate to the nominal yield - ✔✔The
current yield will be higher than the nominal yield.
The nominal yield (stated yield) will be 7%
The market price of the yield will drop when the new issues are at a higher yield.
Current yield = annual interest $/ current market price
market price = .07 / .08 = 875
Current yield =
Current yield = .08
Current yield > Nominal
✔✔How would you quote a US Government bond with a dollar price of
$1012.50? - ✔✔101-8
US GOVT bonds are quoted on a percentage of par at 1/32nds
101 + 8/32 = 101.25 then multiply by 10x to get to par
$1012.50
✔✔A corporation has issued 9%, $1,000 par convertible debenture which convert at
$50. The common stock is currently trading at $60. If the bond and the common stock
are trading at parity a customer purchasing 5M of the bonds will pay: - ✔✔Answer
$6,000.
The bonds are convertible at $50, based on a $1,000 par value therefore each bond
convert into 20 shares at $50. If the common stock is trading at $60 the bond must be
trading at $60 x 20 = $1,200
Since they are buying 5M that means that are paying 5 x $1,200 = $6,000
✔✔Issuance of which of the following municipal issues are NOT subject to statutory
debt limits - ✔✔Special tax bonds
Industrial Revenue Bonds
, Moral Obligation bonds
COPS
(General Obligation are subject to debt limits)
✔✔A corporation has issued bonds at 8%. Three years later similar issues are being
offered in the primary market at 7% which of the following statements will be true about
the current yield and the nominal yield? - ✔✔The current yield will be lower than the
nominal yield. The dollar price of the bond will be at a premium.
Nominal (stated) = .08
Market price of bond = .08/.07 = 1,143
Current Yield = = .06999
✔✔New issues of Government debt are issued in what form?
Fully registered
Fully registered to principal
Book entry
Mega super registered to a bro - ✔✔Book entry
✔✔All new corporate bonds are issued in what form?
Fully registered
Book entry
Mega man entry
Registered to principal - ✔✔Book entry
✔✔zero coupon bond - ✔✔a bond that makes no coupon payments and is thus initially
priced at a deep discount
✔✔call premium - ✔✔The call premium is an amount over the face value of the security
and is paid in the event that the security is redeemed before the scheduled maturity
date. Put another way, the call premium is the difference between the call price of the
bond and its stated par value.
✔✔Who rates commercial paper? - ✔✔Moody's, Standard and Poor's, Fitch
NOT BEST's
BEST's DOESNT DO A THING
✔✔Treasury notes and Bonds are registered in?
SOLUTIONS RATED A+
✔✔A corporation issued a 7% AA sinking fund debenture at par. Three years later,
similar issues are being issues at 8%. Which of the following is true about the
outstanding 7% issue? How does the current yield relate to the nominal yield - ✔✔The
current yield will be higher than the nominal yield.
The nominal yield (stated yield) will be 7%
The market price of the yield will drop when the new issues are at a higher yield.
Current yield = annual interest $/ current market price
market price = .07 / .08 = 875
Current yield =
Current yield = .08
Current yield > Nominal
✔✔How would you quote a US Government bond with a dollar price of
$1012.50? - ✔✔101-8
US GOVT bonds are quoted on a percentage of par at 1/32nds
101 + 8/32 = 101.25 then multiply by 10x to get to par
$1012.50
✔✔A corporation has issued 9%, $1,000 par convertible debenture which convert at
$50. The common stock is currently trading at $60. If the bond and the common stock
are trading at parity a customer purchasing 5M of the bonds will pay: - ✔✔Answer
$6,000.
The bonds are convertible at $50, based on a $1,000 par value therefore each bond
convert into 20 shares at $50. If the common stock is trading at $60 the bond must be
trading at $60 x 20 = $1,200
Since they are buying 5M that means that are paying 5 x $1,200 = $6,000
✔✔Issuance of which of the following municipal issues are NOT subject to statutory
debt limits - ✔✔Special tax bonds
Industrial Revenue Bonds
, Moral Obligation bonds
COPS
(General Obligation are subject to debt limits)
✔✔A corporation has issued bonds at 8%. Three years later similar issues are being
offered in the primary market at 7% which of the following statements will be true about
the current yield and the nominal yield? - ✔✔The current yield will be lower than the
nominal yield. The dollar price of the bond will be at a premium.
Nominal (stated) = .08
Market price of bond = .08/.07 = 1,143
Current Yield = = .06999
✔✔New issues of Government debt are issued in what form?
Fully registered
Fully registered to principal
Book entry
Mega super registered to a bro - ✔✔Book entry
✔✔All new corporate bonds are issued in what form?
Fully registered
Book entry
Mega man entry
Registered to principal - ✔✔Book entry
✔✔zero coupon bond - ✔✔a bond that makes no coupon payments and is thus initially
priced at a deep discount
✔✔call premium - ✔✔The call premium is an amount over the face value of the security
and is paid in the event that the security is redeemed before the scheduled maturity
date. Put another way, the call premium is the difference between the call price of the
bond and its stated par value.
✔✔Who rates commercial paper? - ✔✔Moody's, Standard and Poor's, Fitch
NOT BEST's
BEST's DOESNT DO A THING
✔✔Treasury notes and Bonds are registered in?
