Question 1

A moral obligation is a form of credit enhancement ________.

Accepted Answer

A)  provided by a city, but it is not a legally enforceable or legally binding obligation of the city. 
B)  provided by a city and is also a legally enforceable or legally binding obligation of the city. 
C)  provided by a state, but it is not a legally enforceable or legally binding obligation of the state. 
D)  provided by a state and is also a legally enforceable or legally binding obligation of the state. 
A)  provided by a city, but it is not a legally enforceable or legally binding obligation of the city. 
B)  provided by a city and is also a legally enforceable or legally binding obligation of the city. 
C)  provided by a state, but it is not a legally enforceable or legally binding obligation of the state. 
D)  provided by a state and is also a legally enforceable or legally binding obligation of the state.

Question 2

Because a ________ requires legislative approval to appropriate the funds, it is classified as an appropriation-backed obligation.

Accepted Answer

A)  general obligation debt 
B)  moral obligation bond 
C)  approved obligation bond 
D)  unlimited tax obligation debt 
A)  general obligation debt 
B)  moral obligation bond 
C)  approved obligation bond 
D)  unlimited tax obligation debt

Question 3

One concern about the credit risk of municipal securities is the ________.

Accepted Answer

A)  proliferation of the high number of default. 
B)  proliferation in this market of innovative financing techniques to secure new bond issues. 
C)  proliferation in this market of stagnant financing techniques to secure new bond issues. 
D)  proliferation of poor executive decision-making at the national level. 
A)  proliferation of the high number of default. 
B)  proliferation in this market of innovative financing techniques to secure new bond issues. 
C)  proliferation in this market of stagnant financing techniques to secure new bond issues. 
D)  proliferation of poor executive decision-making at the national level.

Question 4

When bonds are issued outside of the United States, the investor benefits from the tax-exempt feature.

Accepted Answer

A) True 
 B)False

Question 5

Cite two reasons for the exemption afforded municipal securities.

Accepted Answer

The reasons for the exemption afforded m

Question 6

In regards to the primary market for municipal obligations, which of the below statements is FALSE?

Accepted Answer

A)  Depending on how that the debt is marketed, the municipal unit prepares an official statement describing its financial situation and the terms of the issue. 
B)  Most states mandate that general obligation issues be marketed through competitive bidding, but generally this is not necessary for revenue bonds. 
C)  Usually, state and local governments require a competitive sale to be announced in a recognized financial publication, such as The Bond Buyer, which is a trade publication for the municipal bond industry. 
D)  The Bond Buyer provides information on upcoming competitive sales and most negotiated sales, as well as the results of previous weeks. 
A)  Depending on how that the debt is marketed, the municipal unit prepares an official statement describing its financial situation and the terms of the issue. 
B)  Most states mandate that general obligation issues be marketed through competitive bidding, but generally this is not necessary for revenue bonds. 
C)  Usually, state and local governments require a competitive sale to be announced in a recognized financial publication, such as The Bond Buyer, which is a trade publication for the municipal bond industry. 
D)  The Bond Buyer provides information on upcoming competitive sales and most negotiated sales, as well as the results of previous weeks.

Question 7

What is The Bond Buyer.

Accepted Answer

The Bond Buyer is a trade publication fo

Question 8

In the municipal bond market, an odd lot of bonds is ________ or less in par value for retail investors. For institutions, anything below ________ in par value is considered an odd lot.

Accepted Answer

A)  $125,000; $200,000 
B)  $25,000; $100,000 
C)  $50,000; $100,000 
D)  $50,000; $200,000 
A)  $125,000; $200,000 
B)  $25,000; $100,000 
C)  $50,000; $100,000 
D)  $50,000; $200,000

Question 9

The debt retirement structure for a municipal bond can be a serial maturity structure but not a term maturity structure.

Accepted Answer

A) True 
 B)False

Question 10

An unlimited tax general obligation debt ________.

Accepted Answer

A)  has revenue sources that include corporate and individual income taxes, sales taxes, and property taxes. 
B)  is the weaker form of general obligation pledge because it is secured by the issuer's unlimited taxing power. 
C)  is said to be secured by the full faith and credit of the government. 
D)  is a constrained tax pledge because for such debt there is a statutory boundary on tax rates that the issuer may levy to service the debt. 
A)  has revenue sources that include corporate and individual income taxes, sales taxes, and property taxes. 
B)  is the weaker form of general obligation pledge because it is secured by the issuer's unlimited taxing power. 
C)  is said to be secured by the full faith and credit of the government. 
D)  is a constrained tax pledge because for such debt there is a statutory boundary on tax rates that the issuer may levy to service the debt.

Question 11

Municipal securities are issued ________.

Accepted Answer

A)  by state and local governments only. 
B)  by state governments only. 
C)  by state and local governments and by entities that they establish. 
D)  by national, state, and local governments. 
A)  by state and local governments only. 
B)  by state governments only. 
C)  by state and local governments and by entities that they establish. 
D)  by national, state, and local governments.

Question 12

Which of the below statements is FALSE?

Accepted Answer

A)  The convention for both corporate and Treasury bonds is to quote prices as a percentage of par value with 100 equal to par. 
B)  Municipal bonds generally are traded and quoted in terms of yield to maturity but not yield to call. 
C)  A bond traded and quoted in dollar prices (actually, as a percentage of par value) is called a dollar bond. 
D)  Actual price and trade information for specific municipal bonds is available on a daily basis at no charge. 
A)  The convention for both corporate and Treasury bonds is to quote prices as a percentage of par value with 100 equal to par. 
B)  Municipal bonds generally are traded and quoted in terms of yield to maturity but not yield to call. 
C)  A bond traded and quoted in dollar prices (actually, as a percentage of par value) is called a dollar bond. 
D)  Actual price and trade information for specific municipal bonds is available on a daily basis at no charge.

Question 13

The investors in taxable municipal bonds are investors who view them as alternatives to corporate bonds.

Accepted Answer

A) True 
 B)False

Question 14

Which of the below statements is TRUE?

Accepted Answer

A)  Congress passed the Securities Act Amendment of 1975 to broaden federal regulation in the market for municipal debt. 
B)  Securities Act Amendment of 1975 brought brokers and dealers in the municipal securities market, including banks that underwrite and trade municipal securities. 
C)  The Securities Act Amendment of 1975 requires municipal issuers to comply with the registration requirement of the 1933 act. 
D)  When the SEC formally approved the first bond disclosure rule, the disclosure rule had several exemptions. 
A)  Congress passed the Securities Act Amendment of 1975 to broaden federal regulation in the market for municipal debt. 
B)  Securities Act Amendment of 1975 brought brokers and dealers in the municipal securities market, including banks that underwrite and trade municipal securities. 
C)  The Securities Act Amendment of 1975 requires municipal issuers to comply with the registration requirement of the 1933 act. 
D)  When the SEC formally approved the first bond disclosure rule, the disclosure rule had several exemptions.

Question 15

Municipal securities are issued for various purposes including ________.

Accepted Answer

A)  short-term notes sold to cover permanent imbalances between outlays for expenditures and tax inflows. 
B)  short-term notes sold to cover seasonal imbalances between outlays for expenditures and tax inflows. 
C)  short-term notes to finance capital projects such as the construction of schools, bridges, roads, and airport. 
D)  long-term notes sold to cover seasonal imbalances between outlays for expenditures and tax inflows. 
A)  short-term notes sold to cover permanent imbalances between outlays for expenditures and tax inflows. 
B)  short-term notes sold to cover seasonal imbalances between outlays for expenditures and tax inflows. 
C)  short-term notes to finance capital projects such as the construction of schools, bridges, roads, and airport. 
D)  long-term notes sold to cover seasonal imbalances between outlays for expenditures and tax inflows.

Question 16

In regards to the yields on municipal bonds, the yield ratio has changed over time. The ________, the more attractive the tax-exempt feature and the ________.

Accepted Answer

A)  lower the tax rate; lower the yield ratio 
B)  higher the tax rate; higher the yield ratio 
C)  higher the tax rate; lower the yield ratio 
D)  None of these 
A)  lower the tax rate; lower the yield ratio 
B)  higher the tax rate; higher the yield ratio 
C)  higher the tax rate; lower the yield ratio 
D)  None of these

Question 17

Which of the below statements is FALSE?

Accepted Answer

A)  Municipal bonds are issued with one of two debt retirement structures or a combination of both. 
B)  A serial maturity structure requires a portion of the debt obligation to be retired each year. 
C)  A provision that permits the early redemption of a term bond is the call privilege. 
D)  None of these 
A)  Municipal bonds are issued with one of two debt retirement structures or a combination of both. 
B)  A serial maturity structure requires a portion of the debt obligation to be retired each year. 
C)  A provision that permits the early redemption of a term bond is the call privilege. 
D)  None of these

Question 18

Because of the tax-exempt feature of municipal bonds, the yield on municipal bonds ________ that on Treasuries with ________.

Accepted Answer

A)  is equal to; the same maturity 
B)  is greater than; the same maturity 
C)  is less than; the same maturity 
D)  None of these 
A)  is equal to; the same maturity 
B)  is greater than; the same maturity 
C)  is less than; the same maturity 
D)  None of these

Question 19

In regards to municipal bonds, which of the below statements is FALSE?

Accepted Answer

A)  In the municipal bond market, several benchmark curves exist. 
B)  In general, a benchmark yield curve is constructed for AAA-quality-rated state general obligation. 
C)  In the Treasury and corporate bond markets, it is not unusual to find at different times shapes for the yield curve. 
D)  In general, the municipal yield curve is negatively sloped. 
A)  In the municipal bond market, several benchmark curves exist. 
B)  In general, a benchmark yield curve is constructed for AAA-quality-rated state general obligation. 
C)  In the Treasury and corporate bond markets, it is not unusual to find at different times shapes for the yield curve. 
D)  In general, the municipal yield curve is negatively sloped.

Question 20

________ are issued in anticipation of the collection of taxes or other expected revenues. The purpose of these borrowings is to even out irregular flows into the treasuries of the issuing entity.

Accepted Answer

A)  BANs 
B)  TaxRANs 
C)  GANs 
D)  TRANs 
A)  BANs 
B)  TaxRANs 
C)  GANs 
D)  TRANs

Exam 16: Municipal Securities Markets

A moral obligation is a form of credit enhancement ________.

Because a ________ requires legislative approval to appropriate the funds, it is classified as an appropriation-backed obligation.

One concern about the credit risk of municipal securities is the ________.

When bonds are issued outside of the United States, the investor benefits from the tax-exempt feature.

Cite two reasons for the exemption afforded municipal securities.

In regards to the primary market for municipal obligations, which of the below statements is FALSE?

What is The Bond Buyer.

In the municipal bond market, an odd lot of bonds is ________ or less in par value for retail investors. For institutions, anything below ________ in par value is considered an odd lot.

The debt retirement structure for a municipal bond can be a serial maturity structure but not a term maturity structure.

An unlimited tax general obligation debt ________.

Municipal securities are issued ________.

Which of the below statements is FALSE?

The investors in taxable municipal bonds are investors who view them as alternatives to corporate bonds.

Which of the below statements is TRUE?

Municipal securities are issued for various purposes including ________.

In regards to the yields on municipal bonds, the yield ratio has changed over time. The ________, the more attractive the tax-exempt feature and the ________.

Which of the below statements is FALSE?

Because of the tax-exempt feature of municipal bonds, the yield on municipal bonds ________ that on Treasuries with ________.

In regards to municipal bonds, which of the below statements is FALSE?

________ are issued in anticipation of the collection of taxes or other expected revenues. The purpose of these borrowings is to even out irregular flows into the treasuries of the issuing entity.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Options Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters

In the municipal bond market, an odd lot of bonds is or less in par value for retail investors. For institutions, anything below in par value is considered an odd lot.

In regards to the yields on municipal bonds, the yield ratio has changed over time. The , the more attractive the tax-exempt feature and the .

Because of the tax-exempt feature of municipal bonds, the yield on municipal bonds that on Treasuries with .