Chapter 4 Practice Question Answers
1. Answer: C. Municipal bonds pay interest semiannually.
2. Answer: A. Accrued interest for municipal bonds is calculated like agency and corporate bonds, which assume a 360-day year and 30-day month (the 30/360 convention).
3. Answer: C. All quotes distributed or published by municipal securities dealers must be bona fide or firm quotes. A firm bid or offer indicates that the dealer stands ready to buy or sell at the quoted price.
4. Answer: B. Cash settlement may occur the same day as the trade. Regular way settlement for municipals, as for corporate bonds, is two business days after the trade (T + 2).
5. Answer: B. The dated date is the date when interest will start accruing on purchased municipal bonds. The other terms relate to the payment of dividends.
6. Answer: D. The underwriting period on a municipal bond offering ends at the later of the delivery date of the bonds (the closing date) or when the entire issue has been sold to the public.
7. Answer: B. Variable rate securities are long-term bonds tha