Study Question of the Month – June 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Relevant to the Series 50. ***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.*** Continue reading

Congratulations to Jessi B., this month’s Study Question of the Month winner!

This month’s study question from the Solomon Online Exam Simulator question database is now available!

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Study Question

Question (Relevant to the Series 50): Charles lives in Concord, New Hampshire, and buys a bond issued by that city. What is most likely true of this bond?

Answers: 

A. It is an AMT bond

B. It is a GO bond

C. It is a special tax bond

D. It is a triple tax-free bond

Answer: D. It is a triple tax-free bond.

Rationale: Because Charles lives in the municipality that issued the bond, the bond will be tax-exempt at the federal, state, and local level, hence the name “triple tax-free.” 

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Study Question of the Week: July 9, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 51, 52, 53, 62, 79, 82, and 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 7Series 51Series 52Series 53, Series 62, Series 79, Series 82, and Series 99): 

When new bonds are issued with the purpose of using the proceeds to pay off older bonds, it is called?

Answers:

A. Refunding

B. Defeasement

C. A sinking fund redemption

D. A bond SWAP

Correct Answer: A. Refunding

Rationale: A bond refunding is the replacement of existing bonds with new “refunding“ bonds. The issuer of refunding bonds often seeks to lower its interest payments by paying off its previously issued (refunded) bonds with newly issued bonds that pay interest at a lower rate. Another reason to refund existing bonds may be to release the issuer from legal covenants or restrictions in the original indenture.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: June 25, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 51, Series 52, Series 53, Series 62, Series 79, Series 82, and Series 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 7, Series 51Series 52, Series 53, Series 62, Series 79, Series 82, and Series 99): 

Why would a bond issuer decide to issue an advance refunding bond?

Answers:

A. Because interest rates have risen

B. To lock into the current lower interest rates

C. Because the CPI has gone up

D. To try to increase the yield on their bond issue

Correct Answer: B. To lock into the current lower interest rates

Rationale: A bond refunding is the replacement of existing bonds with new “refunding“ bonds. The issuer of refunding bonds seeks to lower its interest payments by paying off its previously issued (refunded) bonds with newly issued bonds that pay a lower interest rate. An advance refunding bond refers to one in which more than 90 days must elapse before the refunded bond can be retired. An issuer typically uses advance refunding when interest rates have dropped significantly, but the next call date is not in the near future. An advance refunding bond allows the issuer to lock in the lower interest rates now without risking that they rise before the call date arrives.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.