Series 7

Series 7 practice questions, page 8 of 16, with answer review and explanations.

Question 36

Bubba want to buy a CMO. In general, how often should he expect to receive interest payments?

  1. every week
  2. every month
  3. every year
  4. at maturity

Question 37

A CMO is issued that has three tranches. One has an average life of 2 years. A second has an average life of 10 years. The third has an average life of 30 years. Initially, interest payments are distributed in this order:

  1. first to the holders of the 2-year tranche
  2. first to the holders of the 10-year tranche
  3. first to the holders of the 30-year tranche
  4. equally to all CMO holders of any tranche

Question 38

Which of the following have a stated interest rate on the face of the certificates?

  1. treasury bills
  2. treasury notes
  3. treasury bonds
  4. both B and C

Question 39

Bubba buys a US treasury bond. The interest he earns is:

  1. subject to federal and state income tax
  2. exempt from federal and state income tax
  3. subject to state income tax but exempt from federal income tax
  4. subject to federal income tax but exempt from state income tax

Question 40

Which of the following does not issue debt securities that trade in the open market?

  1. Fannie Mae
  2. Freddie Mac
  3. Federal Reserve Banks
  4. Federal Land Banks