Study

Front 1

Revenue bonds include all of the following characteristics

Back 1

1) They usually contain a higher interest rate than general
2)Interest payments do not deplete the general revenues of the issuing municipality
3)They are secured by the user charges

Front 2

Debt Limit is:

Back 2

The legal maximum debt incurring power of the issuer

Front 3

A limited tax general obligation is best described in this way

Back 3

The issuer's taxing power is limited to a prescribed maximum rate.

Front 4

In a steadily rising interest rate market, municipalities in need of capital will issue:

Back 4

Long term bonds

Front 5

Current Yield

Back 5

Annual Interest / Current Value

Front 6

A municipal bond pays interest on Jan 1 and July 1st. If a customer purchases the municipal bond settlement on July 31, how many days of accured interest will he pay?

Back 6

30

Front 7

The action prohibited by a closed-end provision in a bond indenture is:

Back 7

Additional borrowing against the revenue source

Front 8

Taxable Equivalent

Back 8

1) It is dependent on the tax bracket of the purchaser
2)It is the reciprocal of the current yield

Front 9

Flow of funds

Back 9

The priority of revenues allocated to debt services, operating expenses, maintenance expenses, and reserves

Front 10

How are Bond Revenues backed

Back 10

1) Set up so that users should pay for the project or facility
2) They are subject to an earnings requirement
3)These bonds usually present greater investment risk than double barrel bonds

Front 11

5, 10, 20 year municipal bonds. If the municipal bond market yields move down 20 basis points,

Back 11

The 20-year bonds will have the greatest rise in price

Front 12

Difference in annual yield on $15,000 in 6.5% municipal bond versus 6.3% municipal bond

Back 12

15,000 x .065 = 975
15,000 x .063 = 945
=30

Front 13

A municipal bond indenture stipulates that funds be set aside for equipment repairs and replacement in the

Back 13

Operation and maintenance funds

Front 14

Regular way municipal bond trade is performed on Tuesday October 12. Interest payment dates for the bond are April 15 and October 15.

Back 14

1) Settlement occurs on the interest payment date
2)No accrued interest need be paid by the buyer
*Interest starts on settlement day for the buyer

Front 15

Municipal bonds with call features

Back 15

1) Bonds can be called in a strong (declining interest rate) market, forcing investors to reinvest at a lower rate
2)The premium, if any, generally does not compensate for the loss of investment return in the bonds are called
3) Bonds will generally be called when the issuer can refund the issue at lower interest rates

Front 16

Insures municipal bonds

Back 16

MBIA

Front 17

General Obligation Bond

Back 17

Municipal government makes periodic payments to the authority to provide for the issue's debt service. Payments are made from direct taxes collected by the municipality

Front 18

Bond Buyer's Revenue Bond Index

Back 18

The average yield of 25 specific revenue bonds with 30-year maturities

Front 19

Reasons to call a revenue bond

Back 19

1) Facility destroyed by fire
2)Interest rates are declining
3)Funds are available in the surplus account to call the bonds

Front 20

Bonds with different issue dates but secured by the same assets

Back 20

Series Bonds

Front 21

While a awaiting the in-flow of funds from a bonds issue a municipality might issue

Back 21

BANs ( Bond Anticipation Notes)

Front 22

Most Municipal bonds have a minimum denomination of

Back 22

$5000

Front 23

What is a Moral Obligation Bond

Back 23

Municipal bond issued with a covenant that, if revenue collections are not sufficient to meet debt service requirement, the state legislature has the authority, but not the obligation to appropriate funds necessary to meet payments.

Front 24

6% Municipal Bond yielding 6.5%. 28% Tax Bracket
What is the tax equivalent yield

Back 24

YTM / 100% - Tax Bracket
6.5% / 100% - 28%
=9.03

Front 25

What are Double Barrel bonds

Back 25

Bonds payable from project revenues and the taxing power of the issuer

Front 26

Who is least likely to include municipal bonds in their portfolio

Back 26

Doctor in a 39.6% Tax Bracket

*Tax equivalent yield
* YTM / 100% - Tax bracket
*Taxable income will increase

Front 27

Revenue Bonds

Back 27

1) Bonds can be issued for any public purpose such as water, sewer, and toll road projects
2) The bonds may not be issued once the legal debt limit of the municipality has been reached

Front 28

Marketabiliy of Municipal Bonds

Back 28

1)Municipal bonds are considered to be second only to US Government securities in terms of safety and high quality.

Front 29

If a municipal bond decreases in price, its yield to maturity will

Back 29

Increase

* Interest and Yield Increase as price decreases

Front 30

Your customer is concerned about maintaining his capital investment and avoiding market risk.
Rank from most appropriate to least appropriate

Back 30

Project notes
Intermediate Bonds
Long Term AA rated GO bonds
Long Term BAA Revenue Bonds

Front 31

Municipal Revenue Bonds

Back 31

1)Principal and interest is payable from income received from users of the system
2)When earnings are insufficient to make principal and interest payments promptly;debt service reserve can be used
3)Interest is exempt from federal income tax

Front 32

Why are Municipal Bonds so popular?

Back 32

1)Customers in higher tax brackets realize greater advantage with municipal bonds over fully taxable bonds
2)Federal and State income tax rates have continued to rise
3)The Tax Reform Act of 1986 eliminated most tax shelters available to individual investors.

Front 33

Tax generally associated with GO ( General Obligation Bonds)

Back 33

Real property Tax

Front 34

Tax equivalent yield for an investor in a 28% tax bracket purchasing 10% Muni Bonds due in 10 yrs on a 9% Yield

Back 34

9.0% / 100 - 28% = 12.5%

Front 35

The federal tax exempt status of municipal bonds originated from the doctrine of mutual tax reciprocity. This doctrine was made effective by

Back 35

The US Supreme Court

Front 36

What would occur if the tax exempt status of Municipal bonds was eliminated?

Back 36

Interst Yield on municipal bonds would rise

Front 37

Reason for a bond not be be rated?

Back 37

Issuer's debt is relatively small

Front 38

Responsibility of municipal bond counsel

Back 38

1)Examining individual bonds to be sure that the serial numbers and signatures are valid
2)Ensuring that Teasry arbitrage regulation are being followed
3)Reviewing the closing documents and transcript of all proceedings

Front 39

Rank
Designated orders
Pre-Sale orders
Group orders
Members orders at the takedown

Back 39

Pre-sale orders
Group orders
Designated orders
Member orders at the takedown

Front 40

What is contained in official notice of sale

Back 40

Offering Yields
Ability to service debt
Bond Rating

*Ask yourself what does underwriter need to know?

Front 41

Analyzing credit situation of municipal bonds should include

Back 41

1)Deficit funding
2)Decline in property value
3)An increase in tax delingquencies

Front 42

Included in official notice of sale

Back 42

1) The time and the date of the sale
2) The requirement of good faith deposit
3)Name of approving attorney

Front 43

Warning signs of declining credit situation

Back 43

1) Rapid increase in debt outstanding
2)Current operating deficits increasing
3) Increasing levels of unfunded pension liabilities
3)

Front 44

Undivided Syndicate -20% in total issue of $40,000,000. What is dealer percentage share in net syndicate profit of account?

Back 44

20%

Front 45

Legal opinions on municipal bonds

Back 45

1)Operations Department at EJ ensures that every primary and secondary issue that is maintained in our municipal bond inventory has a legal opinion.
2)Legal opinions include information about principal maturities and bond numbers
3)They must include assurance that proceeds are used for the stated purpose

Front 46

Good faith deposits include

Back 46

1) Returned to unsuccessful bidders
2)Forfeited if the underwriter fails to perfom under the terms of the bid
3)Applied to payment for new issues on settlement

Front 47

The manager of the municipal bond syndicate is best described by

Back 47

1) The dealer who directs all of the underwriting groups activities

Front 48

A municipal syndicate is offering a 6.5% bond issue to the public at 100. The syndicate manager is allowing a 1/4 point selling concession and a 3/4 point takedown. A member of the syndicate sells $2,000 of bonds. The profit accuring to the syndicate member is

Back 48

1500

Front 49

If the managers of a new municipal issue have been appointed by the issuer to purchase and market the bonds, this is known as a

Back 49

Negotiated issue

Front 50

The priority schedule used to determine the allocation of new municipal securities is described in the

Back 50

Syndicate Letter

Front 51

In describing high grade or AAA rated municipals the term "safe" means

Back 51

Interest and principal will be paid on time

Front 52

Official statement

Back 52

Document prepared by the issuer for distribution to dealers and customers

Front 53

In preparing a bid on a new municipal issue, the first factor to be considered by the syndicate would be

Back 53

The scale on the new issue

Front 54

Feasibility study on a stadium, you should be concerned with:

Back 54

1)Population in the project area
2)Competition with other stadiums

Front 55

The printed statement regarding a municipal bond that concludes with "...the bonds are valid adn binding obligation fo this municipality is furnished by..."

Back 55

An independent law firm

Front 56

The spread on a competitive bid new issue municipal underwriting is the difference between

Back 56

Syndicate bid and re-offering yields

Front 57

The agreement among underwriters is

Back 57

1) Appointment of Syndicate manager
2) Establishment of the concession
3) Establishement of the takedown

Front 58

Important factors to consider in the municipal bond swap

Back 58

1) Capital gain or loss
2)Annual coupon income
3) Time to maturity

Front 59

Valid reasons for an investor to swap securities are

Back 59

1) Establish a loss to affect capital gains or income
2) Improve marketablity of holdings
3)Gain an increased amount current income, and increased yield to maturity, or both

Front 60

A municipal trader participating in a joint account with another municipal trader may

Back 60

1) Sell all the bonds regardless of his liability
2) Effect a transaction for a related portfolio
3)Purchase bonds for an accumulation account

Front 61

Municipal broker's brokers

Back 61

1) Perform trades for dealer banks
2) Perform trades for other municipal broker / dealers

Front 62

Municipal securities dealer XYZ has taken a block of bonds firm for one hour without recall from dealer ABC. Which of the following regarding the understanding between the two dealers are true

Back 62

1) XYZ controls the bonds for one hour
2)ABC may not alter the price for one hour.

Front 63

Maurice and Gordon are bond traders. Maurice has taken a block of bonds firm from Gordon for one hour with a five minute recall.

Back 63

1)Gordon is permitted to show his bonds to other prospected buyers as long as he indicated that these bonds are out firm and subject to recall
2)Gordon is permitted to recall his bonds at any time, but he must give Maurice an option to buy for five minutes.
3)Maurice has the first call on Gordon's bonds for one hour

Front 64

In the securities industry " concessions means

Back 64

1)The portion of the takedown that compensates a dealer who is not a member of the syndicate
2)The portion of the sydicate profit that compensates a dealer who sells bonds for another account
3)The dollar amount of the discount from list offered by one dealer to another in the secondary market

Front 65

An investor owns $100,000 of 6% municipal bonds in a margin account. For federal tax purposes, the interest income would be

Back 65

0

Front 66

A customer purchases 25 municipal bonds in Jan 95 in the secondary market maturing in 10s at 96. Five years later, he sells the bonds at 101. The capital gains for tax purposes would be

Back 66

750

Front 67

A customer purchases a 6%, $1000 municipal bond maturing in 10 years at 105. After four years the un-amortized premium would be

Back 67

30

* $50 to be amortized
*10 yrs to maturity
*$50/10 = $5
* 4 yrs x $5 = $20
* $50 - $20 = $30

Front 68

A $10,000 municipal bond with a 10-year maturity is purchased in the secondary market at 110. The bond is sold four years later for 107. What is the taxable loss or gain

Back 68

$100 gain

*Par $10,000
*Purchase Price 11,000
*Sold after 4 Yrs 11,700
*400 for 4 years
* 11,000 - 400 = 10600
*10,700 - 10,600 = 100 gain

Front 69

Municipal bond tax rules

Back 69

1) The premium paid on municipal bonds, if held to maruty, does not qualify as a tax deduction
2) A profit on the sale of municipal bonds is taxable
3)Interest on all municipal bonds is exempt from state income tax

Front 70

A municipal bond is bought at a discount from par in the primary market. The bond is later sold at a profit prior to maturity.

Back 70

The capital gain would be equal to teh sellign price minus the cost basis.

Front 71

Upon liquidation and distribution, assest are claimed in which order

Back 71

Taxes
Wages
Secured
Unsecured (General Creditors)
Bonds
Preferred
Common

Front 72

Convertible bonds are most frequently issued in

Back 72

A falling market

Front 73

The main purpose of ADRs is to

Back 73

Stimulate American investment in foreign countries

Front 74

A pre-emptive right is the right to

Back 74

Maintain proportionate ownership

Front 75

The funtion of the registrar is to

Back 75

Ensure that proper issue and transfer procedures are followed; they do so by certifying