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Question 1 of 10
1. Question
Ginnie Mae pass-throughs are mortgage-backed securities whose repayment is guaranteed by the:
Correct
Ginnie Mae pass-throughs are mortgage-backed securities whose repayment is guaranteed by the Government National Mortgage Association (GNMA) and thus backed by the full faith and credit of the federal government.
Incorrect
Ginnie Mae pass-throughs are mortgage-backed securities whose repayment is guaranteed by the Government National Mortgage Association (GNMA) and thus backed by the full faith and credit of the federal government.
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Question 2 of 10
2. Question
The investors of the coupon bond will receive cash flow very soon if the:
Correct
The investors of the coupon bond will receive cash flow very soon if the interest payment is higher.
Incorrect
The investors of the coupon bond will receive cash flow very soon if the interest payment is higher.
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Question 3 of 10
3. Question
WHich of the following bonds are issued by transportation companies backed by the assets they employ, such as trucks or airplanes:
Correct
Equipment trusts are bonds issued by transportation companies backed by the assets they employ, such as trucks or airplanes.
Incorrect
Equipment trusts are bonds issued by transportation companies backed by the assets they employ, such as trucks or airplanes.
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Question 4 of 10
4. Question
The direct relationship between interest rate change and price change is represented by which of the following:
Correct
The direct relationship between interest rate change and price change is represented by Positive Duration. Small changes in interest rates can have a huge impact on zero-coupon bonds (much more so than on regular bonds), since the present value of the bond is based entirely on the maturity-date payment and not on any coupon payments
Incorrect
The direct relationship between interest rate change and price change is represented by Positive Duration. Small changes in interest rates can have a huge impact on zero-coupon bonds (much more so than on regular bonds), since the present value of the bond is based entirely on the maturity-date payment and not on any coupon payments
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Question 5 of 10
5. Question
The investors profit simply from the principal increase of zero-coupon bonds, these are also called:
Correct
Zero-coupon bonds cost much less to purchase but are extremely sensitive to changes in interest rates. Because the investors profit simply from the principal increase, these are also called:
Incorrect
Zero-coupon bonds cost much less to purchase but are extremely sensitive to changes in interest rates. Because the investors profit simply from the principal increase, these are also called:
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Question 6 of 10
6. Question
The conversion ratio gives the number of shares a convertible bond may be converted into. It is calculated by which of the following formula:
Correct
The conversion ratio gives the number of shares a convertible bond may be converted into. It is calculated by the following formula: Conversion ratio = (par value of bond) / (conversion price of stock)
Incorrect
The conversion ratio gives the number of shares a convertible bond may be converted into. It is calculated by the following formula: Conversion ratio = (par value of bond) / (conversion price of stock)
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Question 7 of 10
7. Question
A put is the right to sell something to someone. Some bonds, usually municipal bonds, contain a put option. These are known as:
Correct
A put is the right to sell something to someone. Some bonds, usually municipal bonds, contain a put option. These are known as puttable bonds.
Incorrect
A put is the right to sell something to someone. Some bonds, usually municipal bonds, contain a put option. These are known as puttable bonds.
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Question 8 of 10
8. Question
When the issuer sells a new set of bonds at a lower interest rate, but doesn’t call the previous issue of bonds is:
Correct
Pre-refunding is when the issuer sells a new set of bonds at a lower interest rate, but doesn’t call the previous issue of bonds
Incorrect
Pre-refunding is when the issuer sells a new set of bonds at a lower interest rate, but doesn’t call the previous issue of bonds
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Question 9 of 10
9. Question
Crossover refunding refers to a particular way in which a municipality may issue new bonds to pay off older bonds. When the new bonds are issued, which are called as:
Correct
Crossover refunding refers to a particular way in which a municipality may issue new bonds to pay off older bonds. When the new bonds are issued, which are called refunding bonds, their proceeds are placed in an escrow account (i.e. a third-party account).
Incorrect
Crossover refunding refers to a particular way in which a municipality may issue new bonds to pay off older bonds. When the new bonds are issued, which are called refunding bonds, their proceeds are placed in an escrow account (i.e. a third-party account).
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Question 10 of 10
10. Question
Capitalization refers to a company’s equity plus its long-term debt. Which of the following ratios are used to calculate capitalization:
Correct
Capitalization refers to a company’s equity plus its long-term debt. There are several ratios used to calculate this from various perspectives.
debt-to-equity ratio, Bond ratio, Common-stock and preferred-stock ratio.Incorrect
Capitalization refers to a company’s equity plus its long-term debt. There are several ratios used to calculate this from various perspectives.
debt-to-equity ratio, Bond ratio, Common-stock and preferred-stock ratio.