Series 7 – General Securities Representative Exam Fixed Income Securities

Question 1

What is the standard par value (face value) of a typical corporate bond?

Accepted Answer

$1,000

Answer

$100

Answer

$500

Answer

$10,000

Question 2

When market interest rates rise, what generally happens to existing bond prices?

Accepted Answer

They fall

Answer

They rise proportionally with rates

Answer

They remain unchanged

Answer

They double in value

Question 3

A bond is said to be trading at a premium when its market price is:

Accepted Answer

Above par value

Answer

Below par value

Answer

Equal to par value

Answer

Below its coupon rate

Question 4

Which type of bond is backed by the full faith and credit of the U.S. government?

Accepted Answer

Treasury bonds

Answer

Corporate bonds

Answer

Municipal bonds

Answer

Agency bonds

Question 5

A zero-coupon bond is best described as one that:

Accepted Answer

Pays no periodic interest and is issued at a discount to par

Answer

Pays interest monthly at a variable rate

Answer

Has no stated maturity date

Answer

Can only be issued by the U.S. Treasury

Question 6

Interest income from which type of bond is generally exempt from federal income tax?

Accepted Answer

Municipal bonds

Answer

Treasury bonds

Answer

Corporate bonds

Answer

Agency bonds

Question 7

The coupon rate of a bond refers to:

Accepted Answer

The annual interest rate stated on the bond at issuance

Answer

The bond's current yield based on its market price

Answer

The yield to maturity calculated at purchase

Answer

The discount rate used to determine present value