Securites Industry Essentials Exam 3|Questions
and Answers Verified 100% Correct
maturity of commercial paper - ANSWER 270 days or less
conversion at parity - ANSWER stock trading above parity, bonds trading below parity
US Government debt is only taxed at.... - ANSWER the federal tax rate
minimum denomination of treasury bill/callable? - ANSWER $100/No
Treasury Bonds - ANSWER mature in 30 years, can be callable in the last 5
Treasury Inflation-Protected Securities (TIPS) - ANSWER U.S. Treasury securities that
protect investors against inflation because the amount to be repaid rises with inflation
Treasury STRIPS - ANSWER Zero-coupon bonds issued by the US government. They
are always sold at a discount and the difference between the purchase prices and the
face value is the interest.
,GNMA new issues at what price? - ANSWER 25K
When interest rates fall what risk exists for agency debt? - ANSWER prepayment risk
When interest rates rise what risk exists for agency debt? - ANSWER extension risk
What agency has the direct backing of the US gov? - ANSWER GNMA
how are government agencies taxed? - ANSWER Fully taxable
how are muni's taxed? - ANSWER Federal tax exempt, may be triple exempt if in state
Mill Rate - ANSWER Property tax rate that is expressed in tenths of a cent per dollar
of assessed valuation
Feasibility studies are required for what type of bond - ANSWER revenue bond
Industrial Development Bonds - ANSWER take on the credit of the corp user
VRDOs - ANSWER variable rate demand obligations, rates reset, $25K
Tax Anticipation Notes (TANs) - ANSWER Municipalities issue these to finance current
operations in anticipation of future tax receipts. This helps municipalities to even out
cash flow between tax collection periods.
,Revenue Anticipation Notes (RANs) - ANSWER Offered periodically to finance current
operations in anticipation of future revenues from revenue producing projects or
facilities.
Grant Anticipation Notes (GANs) - ANSWER Issued with the expectation of
receiving grant money from the federal government.
Tax and Revenue Anticipation Notes (TRANs) - ANSWER A combination of
the characteristics of both TANs and RANS.
Bond Anticipation Notes (BANs) - ANSWER Issued to obtain financing for projects
that will eventually be financed through the sale of long-term bonds.
Construction Loan Notes (CLNs) - ANSWER Issued to provide interim financing for
the construction of housing projects
maturity and value of corporate notes - ANSWER 270 days, 100,000's +
Banker's Acceptance (BA) - ANSWER A money market instrument used to finance
international and domestic trade. A banker's acceptance is a check drawn on a bank
by an importer or exporter of goods and represents the bank's conditional promise to
pay the face amount of the note at maturity (normally less than three months).
Bank CD's are insured up to what level? - ANSWER 250K
Repurchase Agreements - ANSWER short-term sales of government securities with an
agreement to repurchase the securities at a higher price, loosens credit
, Reverse Repurchase Agreement - ANSWER sell with agreement to buy back,
tightens credit
Federal Funds Rate (FFR) - ANSWER The interest rate banks charge one another on
overnight loans made out of their excess reserves.
discount rate - ANSWER The interest rate on the loans that the Fed makes to banks
broker call rate - ANSWER The interest paid by margin customers on money borrowed
is a variable rate based on the broker call rate.
prime rate - ANSWER Rate of interest banks charge on short-term loans to their
best customers
serial bonds - ANSWER bonds of a single issue that mature on different dates
Series Bonds - ANSWER issued on different dates that mature on same date (fund long
term construction projects - money not needed at once)
How are term bonds quoted - ANSWER % of Par (dollar price basis)
How are municipal bonds quoted? - ANSWER yield basis, basis quote
bond yield formula - ANSWER Bond annual income/current market price
bond call options occur when interest rates do what? - ANSWER fall
and Answers Verified 100% Correct
maturity of commercial paper - ANSWER 270 days or less
conversion at parity - ANSWER stock trading above parity, bonds trading below parity
US Government debt is only taxed at.... - ANSWER the federal tax rate
minimum denomination of treasury bill/callable? - ANSWER $100/No
Treasury Bonds - ANSWER mature in 30 years, can be callable in the last 5
Treasury Inflation-Protected Securities (TIPS) - ANSWER U.S. Treasury securities that
protect investors against inflation because the amount to be repaid rises with inflation
Treasury STRIPS - ANSWER Zero-coupon bonds issued by the US government. They
are always sold at a discount and the difference between the purchase prices and the
face value is the interest.
,GNMA new issues at what price? - ANSWER 25K
When interest rates fall what risk exists for agency debt? - ANSWER prepayment risk
When interest rates rise what risk exists for agency debt? - ANSWER extension risk
What agency has the direct backing of the US gov? - ANSWER GNMA
how are government agencies taxed? - ANSWER Fully taxable
how are muni's taxed? - ANSWER Federal tax exempt, may be triple exempt if in state
Mill Rate - ANSWER Property tax rate that is expressed in tenths of a cent per dollar
of assessed valuation
Feasibility studies are required for what type of bond - ANSWER revenue bond
Industrial Development Bonds - ANSWER take on the credit of the corp user
VRDOs - ANSWER variable rate demand obligations, rates reset, $25K
Tax Anticipation Notes (TANs) - ANSWER Municipalities issue these to finance current
operations in anticipation of future tax receipts. This helps municipalities to even out
cash flow between tax collection periods.
,Revenue Anticipation Notes (RANs) - ANSWER Offered periodically to finance current
operations in anticipation of future revenues from revenue producing projects or
facilities.
Grant Anticipation Notes (GANs) - ANSWER Issued with the expectation of
receiving grant money from the federal government.
Tax and Revenue Anticipation Notes (TRANs) - ANSWER A combination of
the characteristics of both TANs and RANS.
Bond Anticipation Notes (BANs) - ANSWER Issued to obtain financing for projects
that will eventually be financed through the sale of long-term bonds.
Construction Loan Notes (CLNs) - ANSWER Issued to provide interim financing for
the construction of housing projects
maturity and value of corporate notes - ANSWER 270 days, 100,000's +
Banker's Acceptance (BA) - ANSWER A money market instrument used to finance
international and domestic trade. A banker's acceptance is a check drawn on a bank
by an importer or exporter of goods and represents the bank's conditional promise to
pay the face amount of the note at maturity (normally less than three months).
Bank CD's are insured up to what level? - ANSWER 250K
Repurchase Agreements - ANSWER short-term sales of government securities with an
agreement to repurchase the securities at a higher price, loosens credit
, Reverse Repurchase Agreement - ANSWER sell with agreement to buy back,
tightens credit
Federal Funds Rate (FFR) - ANSWER The interest rate banks charge one another on
overnight loans made out of their excess reserves.
discount rate - ANSWER The interest rate on the loans that the Fed makes to banks
broker call rate - ANSWER The interest paid by margin customers on money borrowed
is a variable rate based on the broker call rate.
prime rate - ANSWER Rate of interest banks charge on short-term loans to their
best customers
serial bonds - ANSWER bonds of a single issue that mature on different dates
Series Bonds - ANSWER issued on different dates that mature on same date (fund long
term construction projects - money not needed at once)
How are term bonds quoted - ANSWER % of Par (dollar price basis)
How are municipal bonds quoted? - ANSWER yield basis, basis quote
bond yield formula - ANSWER Bond annual income/current market price
bond call options occur when interest rates do what? - ANSWER fall
