Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
9 Cards in this Set
- Front
- Back
|
Which of the following municipal securities could have been sold in a negotiated underwriting?
A) School bonds B) All of these municipal issues C) Limited tax bonds D) Industrial development bonds |
Answer: B
Either municipal revenue or GO bonds can be underwritten using a negotiated underwriting process to set the terms of the new issue. Industrial development bonds are revenue bonds while limited tax bonds and school bonds are each types of GO issues. |
|
|
Your client is considering 2 bonds: an ABC Corp mortgage bond w/a YTM of 9% and a municipal bond issued by his state. If your client is in the 32% tax bracket, what is the tax-free equivalent yield for the muni bond?
A) 0.0822 B) 0.041 C) 0.0215 D) 0.0612 |
Answer: D
The tax-free equivalent yield is calculated as follows:
Corp rate x (1-tax bracket) .09 x (1-.32) = .0612 or 6.12%
Alternately, the tax equivalent yield is calculated by:
Munic bond rate / (1-tax bracket)
|
|
|
Which of the following underwriting arrangements is associated with an invitation (usually found in The Bond Buyer), directed at investment bankers and broker-dealers, intended to solicit interest in underwriting a new muni issue?
A) Best efforts B) All or none C) Negotiated D) Competitive bid |
Answer: D
With a competitive bid underwriting a municipality publishes invitations to bid in The Bond Buyer or other muni bond publication. Investment bankers and broker-dealers interested in underwriting the new muni issue would respond to the invitation to bid. |
|
|
A municipal finance professional, eligible to vote in a municipality which frequently issues debt securities, has made a contribution to the political campaign of one of the issuer's elected officials. More than which amount would disqualify the firm from engaging in certain municipal businesses with that issuer for 2 years?
A) 100 B) 5000 C) 250 D) 1000 |
Answer: C
$250 is the maximum political contribution allowed under MSRB rules for those eligible to vote in the municipality issuing the debt on a negotiated basis. |
|
|
Which of the following statements regarding a municipal variable rate demand obligation are TRUE?
1. Interest pmts are tied to the movements of another specified interest rate 2. Interest pmts are tied to the movements of an underlying stock or index 3. The coupon rate stays the same for the life of the demand obligation and the price fluctuates 4. The coupon rate of the bond changes and the price remains stable |
Answer: 1 & 4
A muni variable rate demand obligation has interest pmts tied to the movements of a specific int. rt. Because the coupon rate of the bond changes with the market, the price of the demand obligation tends to remain stable. |
|
|
A zero coupon callable revenue issue has been pre-refunded. Under the rules of the MSRB, which of the following are required to be on a customer's confirmation?
1. Zero coupon 2. Callable provisions 3. Pre-refunded 4. Yield |
Answer: All of these
All of this information is required on a customer's confirmation because all of these factors affect the price of a bond. |
|
|
Which of the following are funded by general tax receipts?
A) Tax anticipation notes (TANs) B) Hospital revenue bonds C) Revenue anticipation notes (RANs) D) Bond anticipation notes (BANs) |
Answer: A
Municipalities issue TANs to raise funds immediately. The community expects general tax revenues to generate the necessary funds to pay off the notes. RANs are eventually funded by revenues other than tax receipts, and BANs are eventually funded through the sale of bonds. |
|
|
All of the following information is included in a municipal bond resolution EXCEPT:
A) an authorization to sell the securities. B) compensation paid to the underwriters. C) any call provisions that allow the issuer to redeem the bonds before their scheduled maturity. D) restrictive covenants that are binding on the issuer. |
Answer: B
The bond resolution is the document in which the issuer authorizes the issuance of municipal securities. Among other things, the resolution describes the characteristics of the proposed issue and the issuer's duties to the bondholders. Compensation paid to the underwriters would be found in the official statement. |
|
|
Badentown is planning to raise money in 3 months to build a new city hall. The mayor wishes to start ground prep immediately. How could money be raised to fund the work?
A) Construction Loan Note B) Special Assessment Bond C) Bond Anticipation Note (BAN) D) Limited Tax Bond |
Answer: C
The new city hall will be funded with a bond 3 months from now. A 3 month BAN will raise money now for ground prep. The note's maturity will be set so that it can be paid off with proceeds from the bond sale. |
