Municipal Securities - The Primary Market Quiz Questions

Maturity refers to the date when the principal amount of a municipal bond becomes due and payable to the bondholder. It is the point at which the bond reaches its full term and the issuer is obligated to repay the initial investment. This is an important concept for bondholders as it represents the point at which they will receive their principal back.

The correct answer is "All of the above" because all of the mentioned elements - Price, Coupon, Par Amount, and Yield - are fundamental components of a bond. Price refers to the current market value of the bond, Coupon is the fixed interest payment that the bondholder receives, Par Amount is the face value of the bond, and Yield is the rate of return on the bond. All of these elements are crucial in understanding and evaluating a bond.

A yield curve is a graphical representation of the relationship between the interest rate and the time to maturity of debt. It shows the different yields or interest rates for bonds or other fixed-income securities with different maturity dates. The yield curve is important as it provides insights into market expectations about future interest rates, economic growth, and inflation. By analyzing the shape and movement of the yield curve, investors and policymakers can make informed decisions regarding investments, monetary policy, and economic forecasts.

All of the documents mentioned - legal opinion, tax certificate, official statement, and bond resolution - are included in a bond issuance. These documents are essential for ensuring the legality, tax compliance, and disclosure of information related to the bond issuance. Including all of these documents helps provide transparency and protection for both the issuer and the investors involved in the bond issuance process.

Debt service refers to the schedule or plan in which bonds make payments to the investor or bond holders, including both principal and interest. It is the term used to describe the process of repaying the borrowed money to the lenders.

Daily reference rate based on the interest rates at which banks borrow funds from other banks in the London wholesale money market are in reference to Taxable Bonds. Short-term taxable municipal bonds are priced as a spread to the London Interbank Offered Rate (LIBOR).

A Fixed Rate Bond is a type of bond that has a predetermined interest rate for the entire duration of the bond. The bondholder will receive fixed interest payments at regular intervals until the bond matures. In this case, the answer "10, 20, 30-year maturities" describes a Fixed Rate Bond because it specifies the different time periods for which the bond can be held before it reaches its maturity date.

Maximizing pricing competition between providers is part of credit enhancement.

The given correct answer is "All of the above are duties of a financial advisor." This means that all of the tasks listed, including assisting in developing the financing plan, assisting in underwriter evaluation and selection, assisting in preparing rating agency presentations, and evaluating market conditions and pricing performance of senior managers, are responsibilities of a financial advisor.

Underwriting liability involves the assumption of financial risk by a team of individuals. Each team member is responsible for a proportionate share of the bonds being underwritten. This characteristic ensures that the risk is distributed among the team members, reducing the burden on any one individual. By assuming a proportionate share of the bonds, team members are incentivized to perform well and carefully assess the risk involved in underwriting. This helps to ensure that the pricing of the bonds is accurate and appropriate.