Free SERIES 7 Exam Braindumps (page: 25)

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Which of the following municipal securities carries the full faith and credit of the US government for payment of interest and principal if the issuer’s funds are insufficient?

  1. general obligation bonds issued municipalities
  2. special tax bonds issued by municipalities
  3. revenue bonds issued by municipal port authorities
  4. new housing authority bonds issued by a public housing authority

Answer(s): D

Explanation:

new housing authority bonds issued by a public housing authority. Only housing bonds are backed by the US government if municipalities are unable to meet the obligations for payment.



Bubba buys a municipal bond at a discount and holds it to maturity. Which of the following is true?

  1. interest is taxable as ordinary income
  2. the capital gain is tax exempt
  3. interest is tax exempt, but the capital gain is taxable
  4. the capital gain is tax exempt, but the interest is taxable as ordinary income

Answer(s): C

Explanation:

interest is tax exempt, but the capital gain is taxable. This happens because Bubba purchased the bond in the secondary market with a different price than the original issue face amount.



Prospective bidders for a municipal bond being issued should consult what document for relevant procedures?

  1. the Eastern account agreement
  2. the official notice of sale
  3. the offering circular
  4. the SEC Registration Statement

Answer(s): B

Explanation:

the official notice of sale. All bid requirements are found in the official notice of sale.



Which of the following does not appear in the official notice of sale?

  1. method and place of settlement
  2. denominations and registration privileges
  3. an offering scale of serial maturates
  4. amount of good faith check required

Answer(s): C

Explanation:

an offering scale of serial maturates. The scale is set by the successful bidder.






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