Free SERIES 7 Exam Braindumps (page: 13)

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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

Answer(s): D

Explanation:

both B and C. Treasury notes and treasury bonds have stated interest rates. Treasury bills are always sold at a discount to the face amount payable at maturity.



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

Answer(s): D

Explanation:

subject to federal income tax but exempt from state income tax. The interest on US government securities is taxed by the US government but not by state governments. The opposite is true of bonds issued by a state, which are exempt from federal tax but subject to state taxes -except for taxes of the state that issues them.



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

Answer(s): C

Explanation:

Federal Reserve Banks. Debt securities are not issued by Federal Reserve Banks. All of the other entities do issue debt securities.



When depositors withdraw money from savings institutions to invest in US treasury securities, this is called:

  1. the multiplier effect
  2. disintermediation
  3. reverse repo
  4. open market operations

Answer(s): B

Explanation:

disintermediation. An easier word would be preferable, but that’s the correct term.






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