Big Easy Investment Banking, Inc., is participating in an Eastern account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5 million of bonds. What is the liability of Big Easy remaining in the account?
Answer(s): B
$400,000. In an Eastern account, liability remains open until the entire syndication is closed. Therefore, Big Easy has a liability for 10% of the unsold portion. Since the unsold portion is $6 million, the liability for Big Easy is 10% of that amount, which is $400,000.
Big Easy Investment Banking, Inc., participates in a Western account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5 million of bonds.What is the liability of Big Easy remaining in the account?
Answer(s): D
$1,000,000. In a Western account, each underwriter has divided liability and each is responsibility only for his respective part. In this case, Big Easy is responsible for 10% of $10,000,000 - or $1,000,000.
Bubba buys “double-barreled” municipal bonds. What is the source of guaranteed repayment on these bonds?
one specific municipal project plus the full financial strength of the issuer. Double -barreled bonds are first payable from a specific project, but are further guaranteed by the issuing municipality.
Revenue bonds are least likely to provide constructions funds for:
Answer(s): C
a public school. Schools are typically financed by general obligation bonds. The other choices are examples of revenue bonds.
What percentage of maintenance charges and debt service are covered by the rate covenant of a revenue bond issued to finance a municipal toll road?
120%. The toll facility usually sets rates to cover 120% of maintenance and debt service.
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