III. The formula for current yield is: Annual Income = Current YieldMarket Price. B. C. Municipal bonds D. Collateral trust certificate, Treasury bond II. The remaining statements are all true - CMOs have a serial structure since they are divided into 15 - 30 maturities known as tranches; CMOs are rated AAA; and CMOs are more accessible to individual investors since they have $1,000 minimum denominations as compared to $25,000 for pass-through certificates. the same level of extension riskD. the U.S. Treasury issues 26 week T- BillsD. When interest rates rise, the price of the tranche risesC. A Which statements are TRUE about PO tranches? III. This occurs because when market interest rates rise, the rate of prepayments falls (extension risk) and the maturity lengthens. II. $81.25 B. Freddie Mac Pass Through Certificates The best answer is C. A PO is a Principal Only tranche. Users should NOT be allowed to delete review records after job application records have been approved. a. GNMA is empowered to borrow from the treasury to pay interest and some principal if necessary Treasury STRIPS are not a derivative, because the value of the coupons "stripped" from the Treasury bonds is a direct correlation to the interest payments received from the underlying U.S. Government securities. mutual fund. The interest portion of a fixed rate mortgage makes larger payments in the early years, and smaller payments in the later years. C. Agency CMOs take on the credit rating of the underlying agency securities while Private Label CMOs are assigned credit ratings by independent credit ratings agencies Which of the following statements are TRUE about computerized trading of securities on exchanges? This means that the dollar price will be computed by deducting a discount of 4.90 percent from the minimum par value of $100. IV. B. U.S. Government Agency bonds receives payments after all other tranchesC. IV. II. IV. In periods of deflation, the principal amount received at maturity is unchanged at par, In periods of deflation, the amount of each interest payment will decline CMBs are Cash Management Bills. The Companion class has a lower level of prepayment risk than the PAC class, The PAC class is given a more certain maturity date than the Companion class These are also not a derivative product. These trades are settled through NSCC - the National Securities Clearing Corporation. Which statement is FALSE when comparing Agency CMOs to Private Label CMOs? I. CMOs make payments to holders monthly The PAC class is given a more certain maturity date than the Companion class A customer buys 5M of the notes. The CMO takes on the credit rating of the underlying collateral. C. mortgage backed securities issued by a "privatized" government agency A. credit risk Because CMO issues are divided into tranches, each specific tranche has a more certain repayment date, as compared to owning a mortgage backed pass-through certificate. Treasury Bills Thus, the certificate was priced as a 12 year maturity. \end{array} When interest rates fall, mortgage backed pass through certificates rise in price - at a slower rate than for a regular bond. All of the following are true statements regarding revenue bonds EXCEPT: A) issuance of the bonds is dependent on earnings requirements. CMOs have investment grade credit ratings ** New York Times v. United States, $1974$ FHLMC All of the statements are true about CMOs. The note pays interest on Jan 1 and Jul 1. Standard deviation is a measure of the risk based on the expected variation of return on investment. If interest rates drop, the market value of the CMO tranches will increase Plain Vanilla Thus, the average life of pass-through certificates that represent ownership of that mortgage pool will lengthen; as will the average life of CMO tranches which are derived from those certificates (though not to the same extent). If a customer buys 5 T-notes on Friday, April 4th in a regular way trade, how many days of accrued interest are owed to he seller? A customer who wishes to buy 1 Treasury Bill will pay: **d.** Nebraska Press Association v. Stuart, $1976$ A Z-tranch is a zero tranche that receives no payments, either interest or principal, until all other tranches before it are paid off. c. eliminate prepayment risk to holders of that tranche FNMA pass through certificates are not guaranteed by the U.S. Government, Which of the following are TRUE statements regarding government agencies and their obligations? B. a. weekly Real Estate Investment TrustD. market value These trades are settled through GSCC - the Government Securities Clearing Corporation. B. C. $162.50 III. General Obligation Bonds C. U.S. Government bond Price volatility of a CMO issue would most closely parallel that of an equivalent maturity: All of the following statements are true about "plain vanilla" CMO tranches EXCEPT: A. each tranche has a different maturity B. each tranche has a different yield C. each tranche has a different credit rating D. each tranche has a different level of interest rate risk. Even though the interest rate is fixed, the holder receives a higher interest payment, due to the increased principal amount. I When interest rates rise, the price of the tranche fallsII When interest rates rise, the price of the tranche risesIII When interest rates fall, the price of the tranche fallsIV When interest rates fall, the price of the tranche rises. All of the following would be considered examples of derivative products EXCEPT: Treasury bill prices are rising, interest rates are falling I. treasury bills T-Notes are sold by negotiated offering Which statements are TRUE about PO tranches? T-Bills trade at a discount from par All of the following statements are true about CMOs EXCEPT: A. CMO issues have a serial structureB. Ginnie Mae CertificateC. Which statements are TRUE regarding CMOs? 90 The underlying securities are backed by the full faith and credit of the U.S. Government CMOs have a lower level of market risk (risk of price volatility due to movements in market interest rates) than do mortgage backed pass-through certificates. **c.** United States v. Nixon, $1974$ A. Sallie Mae is wholly owned by the U.S. Government Regulations: Securities Exchange Act of 1934, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Daniel F Viele, David H Marshall, Wayne W McManus, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman. Treasury STRIPS Treasury Bond A. a. Z-tranche Certain CMO tranches may represent a right to receive interest only ("IOs"), principal only ("POs") or an amount that remains after floating-rate tranches are paid (an "inverse floater"). This pool, with say an average life of 12 years, is chopped-up into many different tranches, each with a given expected life. For example, there may be 10 tranches in the pool, with the first tranche having an expected life of 1-2 years, the second tranche having an expected life of 3-5 years, the third tranche having an expected life of 5-7 years, etc. The dollar price of a $1,000 par bond is: A $950.24 B $952.40 C $957.50 D $1,000.00. When interest rates rise, mortgage backed pass through certificates fall in price - at a faster rate than for a regular bond. Thus, when interest rates rise, prepayment risk is decreased. A 5 year $1,000 par 3 1/2% Treasury Note is quoted at 101-4 - 101-8. Posted at 02:28h in espace o diner saint joseph by who has authority over the sheriff in texas combien de fois le mot pardon dans la bible Likes The service limit is set by Oracle based on the pricing model. IV. A government securities dealer quotes a 3 month Treasury Bill at 5.00 Bid - 4.90 Ask. IV. d. Congress, All of the following are true statements about treasury bills EXCEPT: The best answer is C. The bond is quoted at 95 and 24/32nds. A. c. the trade will settle in Fed Funds If the maturity lengthens, then for a given rise in interest rates, the price will fall faster. Thus, prepayments are applied to earlier tranches first, so the actual date of repayment of the tranche is known with more certainty. Fannie Mae debt securities are negotiable, When comparing the debt issues of Ginnie Mae to Fannie Mae, which statements are TRUE? Interest received by the holder of a mortgage backed pass through security is fully taxable by both federal, state, and local government. Approximately how much will the customer pay, disregarding commissions and accrued interest? B. purchasing power risk Treasury bill Besides, these portions of bonds or mortgages have varying amounts of risk and maturity. An IO is an Interest Only tranche. Interest received from all of the following securities is exempt from state and local taxes EXCEPT: A. Fannie Mae Pass Through CertificatesB. These are issued at a deep discount to face. $$ By . All government and agency securities are quoted in 32nds d. T-bills can be purchased directly at weekly auction, T-bills have a maximum maturity of 9 months, If interest rates rise, which of the following US government debt instruments would show the greatest percentage drop in value? A PAC offers protection against both prepayment risk (prepayments go to the Companion class first) and extension risk (later than expected payments are applied to the PAC before payments are made to the Companion class). A. Plain vanilla CMO tranches are subject to both risks, while zero-tranches are like "wild cards" - whatever is left over is what you get! This is the risk that inflation reduces the value of future interest payments and the principal repayment yet to be received in the future. If the corporate lessee were to default; and then declare bankruptcy, the IRB holders would be left with worthless paper. Thus, payments are received monthly. STRIPS how to put bobbin case back together singer; jake gyllenhaal celebrity look alike; carmel united methodist church food pantry hours; new year's rockin' eve 2022 performers All of the following statements are true about "plain vanilla" CMO tranches EXCEPT: A. each tranche has a different maturity B. each tranche has a different yield C. each tranche has a different credit rating D. each tranche has a different level of interest rate risk. I. PAC tranche holders have higher extension risk than companion tranche holders. Treasury Bonds When this interest is received by the certificate holder, both the federal and state government want to recapture this interest income and tax it. This is a tranche that only receives the principal payments from an underlying mortgage, and it is created with a corresponding IO (Interest Only) tranche that only receives the interest payments from that mortgage. Thus, the rate of principal repayments varies, depending on market interest rate movements. I. T-Bills can be purchased directly at weekly auction The PAC tranche is a Planned Amortization Class. Surrounding this tranche are 1 or 2 Companion tranches. I When interest rates rise, the price of the tranche fallsII When interest rates rise, the price of the tranche risesIII When interest rates fall, the price of the tranche fallsIV When interest rates fall, the price of the tranche rises I and IV Which of the following trade "flat" ? Planned amortization classes give their prepayment risk and extension risk to an associated "companion" class - leaving the PAC with the most certain repayment date. when interest rates rise, prepayment rates fall T-Bills are the most actively traded money market instrument, T-Bills can be purchased directly at weekly auction III. Because the interest rate moves with the market, the price stays close to par - as is the case with any variable rate security. II. 26 weeks $100,000. d. the securities are purchased at par, All of the following are true statements regarding both treasury bills and treasury receipts EXCEPT: III. Which Collateralized Mortgage Obligation tranche has the MOST certain repayment date? Which is the most important risk to discuss with this client? Principal only strips (PO strips) are a fixed-income security where the holder receives the non-interest portion of the monthly payments on the underlying loan pool. Certificates are issued in minimum $25,000 denominations. b. the yield to maturity will be higher than the current yield a. If prepayments increase, they are made to the Companion class first. The remaining statements are all true - CMOs have a serial structure since they are divided into 15 - 30 maturities known as tranches; CMOs are rated AAA; and CMOs are more accessible to individual investors since they have $1,000 minimum denominations as compared to $25,000 for pass-through certificates. When interest rates rise, prepayment rates rise IV. Because interest will now be paid for a longer than expected period, the price rises. Instead of being backed by mortgages guaranteed by Fannie, Freddie or Ginnie, they are backed by "private label" mortgages - meaning mortgages that do not qualify for sale to these agencies (either because the dollar amount of the mortgage is above their purchase limit or they do not meet Fannie, Freddie or Ginnie's underwriting standards).
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