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Free SERIES 7 Exam Braindumps (page: 24)

Page 23 of 101
PDF with 400 Questions

Feasibility studies and engineering surveys are most necessary prior to which of the following new offerings?

  1. general obligation bonds
  2. limited tax bonds
  3. revenue bonds
  4. corporate debentures

Answer(s): C

Explanation:

revenue bonds. The security for a revenue bond depends on the revenue produced by the specific facility. Engineering estimates of constructions costs and potential traffic flow are critical.



Which of the information below does not appear in the official notice of sale?

  1. the type of bond
  2. the amount of required good faith check
  3. the names of underwriting syndicate members
  4. the method and place of settlement

Answer(s): C

Explanation:

the names of the underwriting syndicate members. At the time the notice of sale is published, the syndicate has generally not been formed. All the other information is required.



Bubba buys a municipal bond at 102 and holds it ten years to maturity. For tax purposes, how is that premium treated?

  1. recorded as a long-term capital loss
  2. an ordinary loss taken as a deduction from taxable income
  3. amortized over the life of the bond resulting in no loss at maturity
  4. carried forward as a premium loss applied against profits realized on future municipal securities

Answer(s): C

Explanation:

amortized over the life of the bond resulting in no loss at maturity. For tax purposes, premiums are amortized over the life of the bond. Some amount is taken each year.



Bubba buys a ten-year municipal and at 102 and sells it five years later at 101. What is tax treatment?

  1. a $10 long-term capital loss is realized
  2. the $10 loss is applied as a reduction against ordinary income
  3. no capital loss or income deduction is realized
  4. the $10 loss is applied against future profits in municipal securities

Answer(s): C

Explanation:

no capital loss or income deduction is realized. The $20 premium is amortized over the ten-year life of the bond. After five years, half of the premium has been written down. The remaining premium is the same as the premium received upon selling the bond. The sale at 101 results in no loss or gain.






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