SERIES 65 - investment vehicle
characteristics Exam 2025 Questions
and Answers
TIPS - Treasury Inflation Protected Security - ANSWER✔✔-- issued by the treasury
- principal adjusted for inflation (use CPI) ***
- stated interest rate constant
- - semiannual payments fluctuate bc stated rate is applied to inflation-adjusted principal
maturities: 5, 10 and 30 years
STRIPS - separately traded registered interest and principal securities - ANSWER✔✔-- zero-coupon
bonds deeply discounted by US treasury
- accrete in value = gain in value every year; gain considered interest income
"phantom interest" - ANSWER✔✔-investor receives no interest over the life of these instruments,
but is taxed on the accretion annually
- popular in tax sheltered accounts: IRAs, coverdalls and 529s
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 1
,- have to report income on money u didnt actually hold in your hand
corporate bond taxation - ANSWER✔✔-interest taxable at all levels
- federal
- state (if applicable)
- city (if applicable)
capital gains taxable IF - ANSWER✔✔-bonds sell at profit to investor
municipal bonds (three) - ANSWER✔✔-Government Obligation Bonds (GO)
revenue bonds
IDRs (Industrial Revenue Bonds)
Government Obligation Bonds (GO) - ANSWER✔✔-backed by full faith and credit of issuer
revenue bonds - ANSWER✔✔-self-supporting
- backed by issuer fees, revenues, or assessments
- project-centered (hospitals, toll roads, airports)
** projects generate revenue on own
IDRs (Industrial Revenue Bonds) - ANSWER✔✔-- issued to construct sports stadiums and parking
lots
- backed by corporations
- typically NOT exempt from taxes at the federal level
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 2
,** corporate partner involved - not tax exempt
ex: sports stadiums, immediate commercial
methods used to determine value of fixed income securities : - ANSWER✔✔-capital gains
interest
municipal bonds - TAXATION - ANSWER✔✔-capital gains - taxable at all levels
interest -
- at federal level tax FREE
- at state level :
-- if a bond is issued in investors state tax FREE
-- if a bond is issued outside of investors state - TAXABLE
THREE basic Financial classes - ANSWER✔✔-1. stocks
2. bonds
3. cash
CASH - ANSWER✔✔-= insured bank deposits
OR money market instruments
insured bank deposits - ANSWER✔✔-- checking accounts
- NOW accounts
- savings accounts
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 3
, - bank CDs (not securities, FDIC insured)
*unlike bank CDs, negotiable CDs are securities but still carry FDIC insurance
money market instruments - ANSWER✔✔-- treasury bills - ST gov sec.
- bankers acceptances- CD international transaction
- commercial paper - ST borrowing by AAA rate corps for 9 mo's or less
- repurchase agreements - bank agreements trade $ w each other over night, small int rate electronic
trans, back and forth in 24 hrs
Insured deposits / Demand Deposits - ANSWER✔✔-funds held with financial institution that the
owner may obtain immediately upon demand
- checking accounts
- NOW (negotiable orders of withdrawal)
- money market accounts
- some savings accounts
demand deposits + cash = M1 - ANSWER✔✔-M1 is the narrowest measure of domestic money
supply
CDs - ANSWER✔✔-bank-issued time deposit financial instruments
- may or may not be negotiable
- part of M2 money supply
time deposits - ANSWER✔✔-value get, not exactly what shows now
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 4
characteristics Exam 2025 Questions
and Answers
TIPS - Treasury Inflation Protected Security - ANSWER✔✔-- issued by the treasury
- principal adjusted for inflation (use CPI) ***
- stated interest rate constant
- - semiannual payments fluctuate bc stated rate is applied to inflation-adjusted principal
maturities: 5, 10 and 30 years
STRIPS - separately traded registered interest and principal securities - ANSWER✔✔-- zero-coupon
bonds deeply discounted by US treasury
- accrete in value = gain in value every year; gain considered interest income
"phantom interest" - ANSWER✔✔-investor receives no interest over the life of these instruments,
but is taxed on the accretion annually
- popular in tax sheltered accounts: IRAs, coverdalls and 529s
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 1
,- have to report income on money u didnt actually hold in your hand
corporate bond taxation - ANSWER✔✔-interest taxable at all levels
- federal
- state (if applicable)
- city (if applicable)
capital gains taxable IF - ANSWER✔✔-bonds sell at profit to investor
municipal bonds (three) - ANSWER✔✔-Government Obligation Bonds (GO)
revenue bonds
IDRs (Industrial Revenue Bonds)
Government Obligation Bonds (GO) - ANSWER✔✔-backed by full faith and credit of issuer
revenue bonds - ANSWER✔✔-self-supporting
- backed by issuer fees, revenues, or assessments
- project-centered (hospitals, toll roads, airports)
** projects generate revenue on own
IDRs (Industrial Revenue Bonds) - ANSWER✔✔-- issued to construct sports stadiums and parking
lots
- backed by corporations
- typically NOT exempt from taxes at the federal level
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 2
,** corporate partner involved - not tax exempt
ex: sports stadiums, immediate commercial
methods used to determine value of fixed income securities : - ANSWER✔✔-capital gains
interest
municipal bonds - TAXATION - ANSWER✔✔-capital gains - taxable at all levels
interest -
- at federal level tax FREE
- at state level :
-- if a bond is issued in investors state tax FREE
-- if a bond is issued outside of investors state - TAXABLE
THREE basic Financial classes - ANSWER✔✔-1. stocks
2. bonds
3. cash
CASH - ANSWER✔✔-= insured bank deposits
OR money market instruments
insured bank deposits - ANSWER✔✔-- checking accounts
- NOW accounts
- savings accounts
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 3
, - bank CDs (not securities, FDIC insured)
*unlike bank CDs, negotiable CDs are securities but still carry FDIC insurance
money market instruments - ANSWER✔✔-- treasury bills - ST gov sec.
- bankers acceptances- CD international transaction
- commercial paper - ST borrowing by AAA rate corps for 9 mo's or less
- repurchase agreements - bank agreements trade $ w each other over night, small int rate electronic
trans, back and forth in 24 hrs
Insured deposits / Demand Deposits - ANSWER✔✔-funds held with financial institution that the
owner may obtain immediately upon demand
- checking accounts
- NOW (negotiable orders of withdrawal)
- money market accounts
- some savings accounts
demand deposits + cash = M1 - ANSWER✔✔-M1 is the narrowest measure of domestic money
supply
CDs - ANSWER✔✔-bank-issued time deposit financial instruments
- may or may not be negotiable
- part of M2 money supply
time deposits - ANSWER✔✔-value get, not exactly what shows now
FOR STUDY PURPOSES ONLY COPYRIGHT © 2025 ALL RIGHTS RESERVED 4
