Chapter 4 Practice Questions
1. Municipal bonds pay interest every:
A. Month
B. Three months
C. Six months
D. Year
2. Accrued interest for municipal bonds is calculated based on the assumption that a year has:
A. 360 days
B. 365 days
C. 366 days
D. 372 days
3. A firm quote for a municipal security is a quote that:
A. Will not change for at least five minutes after publication
B. Is only made available to other broker-dealers
C. The dealer is ready to buy or sell at
D. Does not lock or cross any other quotes
4. Trade A and Trade B occur on the same day. Trade A is a cash settlement trade, and Trade B settles via regular way settlement. Both trades are for municipal bonds. Trade B will settle:
A. Three business days after Trade A
B. Two business days after Trade A
C. One business day after Trade A
D. Two business days before Trade A
5. The date when interest starts accruing on purchased municipal bonds is known as the:
A. Record date
B. Dated date
C. Ex-date
D. Declaration date
6. The underwriting period on a municipal bond offering ends:
A. At the closing date
B. When the entire issue has been sold to the public
C. At the earlier of the closing date and when the entire issue has been sold to the public
D. At the later of the closing date and when the entire issue has been sold to the public
7. Which of the following securities would subject the issuer to the greatest amount of interest rate risk?
A. Original issue discount bonds
B. Variable rate securities
C. Revenue anticipation notes
D. Taxable municipal bonds
8. A municipal securities trade occurs on Friday, May 12. Assuming there are no intervening holidays, regular way settlement would occur on:
A. May 15
B. May 16
C. May 17
D. May 12
9. _____ risk is a concern for bondholders when interest rates _____.
I. Interest rate; rise
II. Call; rise