Series 7 – General Securities Representative Exam Fixed Income Securities 3

Question 1

General obligation (GO) municipal bonds are backed by:

Accepted Answer

The full taxing power of the issuing municipality

Answer

Revenues from a specific project such as a toll road

Answer

U.S. Treasury guarantees

Answer

Corporate assets pledged as collateral

Question 2

Revenue bonds are repaid primarily through:

Accepted Answer

Revenues generated by the specific project being financed

Answer

Property taxes collected by the municipality

Answer

State income tax revenues

Answer

Federal government transfer payments

Question 3

Which feature distinguishes Treasury Inflation-Protected Securities (TIPS) from other Treasury bonds?

Accepted Answer

The principal value adjusts with inflation as measured by the CPI

Answer

The coupon rate adjusts periodically with CPI

Answer

Interest income is exempt from federal income tax

Answer

They are callable before maturity

Question 4

Which U.S. government security has the shortest maturity at issuance?

Accepted Answer

Treasury bills

Answer

Treasury bonds

Answer

Treasury notes

Answer

TIPS

Question 5

A convertible bond gives the bondholder the right to:

Accepted Answer

Convert the bond into shares of the issuer's common stock

Answer

Call the bond back from the issuer before maturity

Answer

Extend the bond's maturity at their option

Answer

Increase the coupon payment if rates rise

Question 6

Collateralized Mortgage Obligations (CMOs) are mortgage-backed securities that are backed by:

Accepted Answer

Pools of underlying mortgage loans

Answer

Municipal tax revenues pledged to investors

Answer

U.S. Treasury securities held in trust

Answer

Corporate bond portfolios

Question 7

The maximum maturity for commercial paper to be exempt from SEC registration is:

Accepted Answer

270 days

Answer

30 days

Answer

90 days

Answer

365 days