Municipal Securities - The Primary Market

10 Questions  I  By Lpinchik
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  • 1. 
    Which of the following does not describe Tax Exemption?
    • A. 

      Interest from most municipal securities is exempt from federal income taxes

    • B. 

      Daily reference rate based on the interest rates at which banks borrow funds from other banks in the London wholesale money market

    • C. 

      Each state exempts interest on its own municipal securities from its residents’ personal income tax.

    • D. 

      A state may exempt interest paid by another state’s municipal securities.


  • 2. 
    Which of the following is not a characteristic of a rating agency?
    • A. 

      Assigns rating to a bond issuance

    • B. 

      Update ratings periodically while debt is outstanding

    • C. 

      Maximizes pricing competition between providers

    • D. 

      May be consulted on potential credit structures and fiscal actions


  • 3. 
    Which of the following describes a Fixed Rate Bond?
    • A. 

      Unsecured promissory notes

    • B. 

      10, 20, 30-year maturities

    • C. 

      Usually mature in one year or less

    • D. 

      Coupon rate is reset periodically

    • E. 

      Bank letter or credit required


  • 4. 
    When preparing for pricing which of the following is a characteristic of underwriting liability?
    • A. 

      Providing incentives to perform

    • B. 

      Promoting equal opportunities

    • C. 

      Proportionate share of bonds assumed by team members

    • D. 

      Broadening distribution

    • E. 

      Lowering costs


  • 5. 
    The fundamental elements of a bond include:
    • A. 

      Price

    • B. 

      Coupon

    • C. 

      Par Amount

    • D. 

      Yield

    • E. 

      All of the above


  • 6. 
    _________ is the date the principal of a municipal bond becomes due and payable to the bondholder.
    • A. 

      Expenses

    • B. 

      Debt management

    • C. 

      Trustee

    • D. 

      Maturity


  • 7. 
    What is debt service?
    • A. 

      The term for the schedule upon which bonds pay principal and interest to the investor/bond holders.

    • B. 

      Benefit of Long-Term Banking Support for Long-Term Capital Program Needs.

    • C. 

      The Syndicate which Names the Lowest Interest Cost is the Winning Bidder.

    • D. 

      All of the above


  • 8. 
    Which of these is not the duty of a financial advisor (FA)?
    • A. 

      Assists in developing the financing plan

    • B. 

      Assists in underwriter evaluation and selection

    • C. 

      Assists in preparing rating agency presentations

    • D. 

      Evaluates market conditions and pricing performance of senior manager

    • E. 

      All of the above are duties of a financial advisor


  • 9. 
    What documents are included in a bond issuance?
    • A. 

      Legal opinion

    • B. 

      Tax certificate

    • C. 

      Offical statement

    • D. 

      Bond resolution

    • E. 

      All of the above


  • 10. 
    What is a yield curve?
    • A. 

      Daily reference rate based on the interest rates at which banks borrow funds from other banks in the London wholesale money market.

    • B. 

      The relation between the interest rate (or cost of borrowing) and the time to maturity of the debt.

    • C. 

      Competition for negotiated financings minimized spread difference.

    • D. 

      Evaluation of market conditions and pricing performance of senior manager


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