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Which of the following statements describes an investor’s experience at the maturity of a municipal bond?
A. The investor will receive the principal only.
B. The investor will receive the principal and all interest payments.
C. The Investor will receive par value and final interest.
D. The investor will receive the market value of the bond.
C. The Investor will receive par value and final interest.
A 10 year treasury note is trading at 99.16 what is the dollar price of the bond?
A. 99.16
B. 991.60
C. 995
D. 999.16
C. 995
The Producer Price Index (PPI) has continued to increase over the past 6 months. During this time interest rates have most likely
A. Remained stable
B. Fallen
C. Risen
D. Been highly volatile
C. Risen
An agreement that permits an investor to sell municipal securities at an agreed-upon price until some future time is called a:
A. Tax-exempt warrant
B. Put option
C. Negotiated offering
D. Divestment agreement
B. Put option
Which of the following is considered the most sensitive short-term interest rate?
A. Broker's Call Rate
B. Discount Rate
C. Federal Funds Rate
D. Prime Rate
C. Federal Funds Rate
Which of the following would not be relevant in the calculation of a bond’s yield-to-maturity?
A. Coupon rate
B. Spot rate
C. Par value
D. Years to Maturity
B. Spot rate
On Monday, November 1 an investor purchases a 4% municipal bond for regular way settlement. Assuming coupon dates of February 1 and August 1, how many days of accrued interest are owed to the seller?
A. 92 days
B. 93 days
C. 94 days
D. 95 days
A. 92 days
Of the interest rates listed below, which is considered the most volatile?
A. Discount Rate
B. Federal funds rate
C. Broker's Call Loan Rate
D. Prime rate
B. Federal funds rate
An investor must pay accrued interest for a secondary market purchase of:
A. Zero-coupon bonds
B. Tax anticipation notes
C. Series EE savings bonds
D. Treasury bills
B. Tax anticipation notes
To calculate the value of an embedded call option to the issuer of a municipal bond, you need to know two inputs. They are:
A. price on call date and price at maturity.
B. price straight and price callable.
C. YTM and call date.
D. call date and call price.
B. price straight and price callable.
Which of the following activities would have a negative effect on the US balance of payments?
A. An increase in exports to foreign countries
B. New US investments abroad
C. An increase in foreign purchases of US securities
D. An increase in the value of the dollar against foreign currency
B. New US investments abroad
Which of the following instruments is used by issuers to protect against rising interest rates?
A. Interest rate cap
B. Interest rate floor
C. Floating to fixed interest rate swap
D. Basis Swap
A. Interest rate cap
The most appropriate yield to use in determining the present value of a bond that can be redeemed by the issuer prior to maturity is
A. yield to put.
B. yield to maturity.
C. yield to worst.
D. yield to call.
D. yield to call.
A municipal bond with a 6% coupon is priced at a 7.20 basis. If the bond's yield to maturity increases by 40 basis points, the yield to maturity is:
A. 6.80%
B. 7.60%
C. 5.60%
D. 6.40%
B. 7.60%
What metric would you use to determine how much the dollar price of a bond can be expected to change for each basis point change in interest rates or yield?
A. FV05
B. Effective duration
C. DV01
D. Modified duration
C. DV01
Which of the following is not established by the Federal Reserve Board?
A. Discount rate
B. Reserve requirements
C. Regulation T
D. Federal funds rate
D. Federal funds rate
Which of the following statements describes an investor’s experience at the maturity of a municipal bond?
A. The investor will receive the principal only
B. The investor will receive the principal and all interest payments
C. The investor will receive par value and the final interest payment
D. The investor will receive the market value of the bond
C. The investor will receive par value and the final interest payment
A municipal bond's coupon rate is 3%. The same issuer is now issuing bonds of similar quality and maturity with a coupon rate of 3.5%. The 3% bond will
A. Continue to trade in the secondary market at its par value with no adjustment to the coupon rate
B. Trade at its par value because the issuer will increase the coupon on the 3% bond to ensure parity with newly issued bonds
C. Trade at a discount in the secondary market
D. Trade at a premium in the secondary market
C. Trade at a discount in the secondary market
If interest rates are expected to rise, which of the following securities would have the greatest amount of capital risk?
A. A bond trading at a premium and callable in one year
B. A bond trading at a premium and callable in five years
C. A bond trading at a premium and callable in 10 years
D. A bond trading at a premium and callable in 20 years
D. A bond trading at a premium and callable in 20 years
A $10,000 U.S. Treasury bond is quoted as Bid 102.8, Ask 16. How much would an investor pay to buy this bond?
A. $10,216
B. $10,225
C. $10,250
D. $11,200
C. $10,250
If the Federal Reserve contracts to buy securities at a fixed price and resell them to a primary dealer it is engaged in:
A. Open market operations
B. A repurchase agreement
C. A debt management transaction
D. A reverse repurchase agreement
B. A repurchase agreement
If the federal reserve determines that an easy money policy is necessary which of the following is likely?
A. The value of the dollar will rise
B. Interest rates will rise
C. Bond prices will rise
D. Stock prices will fall
C. Bond prices will rise
A municipal bond has a modified duration of 7.2 years. If interest rates rise by 1%, what can you expect would happen to the value of the bond?
A. It will fall by 7.2%
B. It will rise by 0.072%
C. It will rise by 7.2%
D. It will rise by 3.6%
A. It will fall by 7.2%
All of the following statements are TRUE regarding yield curves, EXCEPT:
A. They are fixed and may only be changed by the Federal Reserve Board
B. In a descending curve, short-term rates are greater than long-term rates
C. In a flat yield curve, both short-term and long-term rates are equal
D. In an ascending curve, short-term rates are lower than long-term rates
A. They are fixed and may only be changed by the Federal Reserve Board
In recent months, prices of oil and gas have risen dramatically. Which two of the following statements are correct?
I. Inflation is likely to result
II. Bond prices are likely to rise
III. A recession is likely
IV. The value of the dollar is likely to strengthen
A. II and III
B. II and IV
C. I and III
D. I and IV
D. I and IV
I. Inflation is likely to result and,
IV. The value of the dollar is likely to strengthen