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Question 1

What is a step-up, long-term CD?

Answer 1

A CD that offers an interest rate that is lower than current rates, with subsequent interest rates paid being higher

Question 2

General Obligation (GO) bonds are backed by the issuerÕs ________________________ and their ability to levy _______.

Answer 2

General Obligation (GO) bonds are backed by the issuerÕs full faith and credit and their ability to levy taxes.

Question 3

By what types of taxes are state general obligation bonds backed?

Answer 3

Income, sales, or gasoline tax, but also licensing fees and fines.

Question 4

Local general obligation bonds are backed by what type of tax?

Answer 4

Property tax (e.g., school district bonds)

Question 5

How is property tax calculated?

Answer 5

Assessed value x millage rate

Question 6

What does 1 mill equal?

Answer 6

$1.00 per thousand dollars of assessed value (.001 as a decimal)

Question 7

When analyzing GO bonds, what are some important considerations?

Answer 7

Property values, per capita income and debt, population, current debt, tax collection, unfunded pension liabilities

Question 8

Define overlapping debt.

Answer 8

Debt of a municipality that is shared with another political entity (e.g., school district debt)

Question 9

Are debentures considered secured or unsecured?

Answer 9

Unsecured. They are backed only by the issuerÕs full faith and credit.

Question 10

Name some of the advantages of buying convertible bonds.

Answer 10

Consistent interest payments, appreciation if stock rises, downside protection if stock falls (since itÕs still a bond).

Question 11

What are Eurodollar bonds?

Answer 11

Dollar-denominated bonds issued outside the U.S.

Question 12

What bonds are dollar-denominated, U.S. registered, and issued by multinational companies and foreign governments?

Answer 12

Yankee Bonds

Question 13

T-Bills are issued in maturities of: ____ week, ____ week, ____ week, and ____ week

Answer 13

T-Bills are issued in maturities of: 4 week, 13 week, 26 week, and 52 week

Question 14

What is the maturity range of a T-Note?

Answer 14

2 to 10 years

Question 15

What is the maturity range of a T-Bond?

Answer 15

More than 10 years

Question 16

What does ownership of a GNMA pass-through certificate represent?

Answer 16

An undivided interest in a pool of residential mortgages

Question 17

How often do GNMA pass-throughs make payments?

Answer 17

GNMA pass-throughs make payments monthly.

Question 18

What is a derivative?

Answer 18

A financial product that derives its value from the value of underlying assets such as stocks, bonds, or mortgages

Question 19

Which tranche has the most predictable cash flow and maturity?

Answer 19

The PAC (Planned Amortization Class) tranche

Question 20

Which tranche has the most unpredictable cash flow and maturity?

Answer 20

The support or companion tranche

Question 21

The tranche that is the last to receive cash flow is the ____________.

Answer 21

The tranche that is the last to receive cash flow is the Z tranche.

Question 22

What are T-STRIPS?

Answer 22

Any T-Note/T-Bond where a BD has stripped the interest and principal payments to sell separately as zero-coupons

Question 23

What are TIPS?

Answer 23

Money-market securities have a maturity of __________________.