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

GO bonds are secured by the issuer's ability to levy taxes on residents, making them backed by the full faith and credit of the municipality.

Question 2

Revenue bonds are repaid primarily through:

Accepted Answer

Revenues generated by the specific project being financed

Answer

Revenue bonds are repaid solely from the income produced by the project they finance, such as tolls, utility fees, or stadium revenues.

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

With TIPS, the principal is adjusted upward with inflation (CPI), so the dollar amount of each coupon payment and the final principal repayment rise with inflation.

Question 4

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

Accepted Answer

Treasury bills

Answer

Treasury bills (T-bills) are short-term instruments with maturities of 4, 8, 13, 26, or 52 weeks, making them the shortest-maturity U.S. government securities.

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

Convertible bonds include an option for the holder to exchange the bond for a specified number of the issuer's common shares, providing equity upside potential.

Series 7 – General Securities Representative Exam Practice Test

Series 7 – General Securities Representative Exam Practice Test

Series 7 – General Securities Representative Exam Fixed Income Securities 3