Payment is to be made in: Which is considered to be a direct obligation of the US government? interest payments are exempt from state and local tax Ginnie MaesD. For the exam, these securities are still rated AAA. a. prepayment speed assumption Thus, the PAC class is given a more certain maturity date; while the Companion class has a higher level of prepayment risk if interest rates fall; and a higher level of so-called extension risk - the risk that the maturity may be longer than expected, if interest rates rise. Collateralized mortgage obligation tranches that are available to the public are generally rated: A government securities dealer quotes a 3 month Treasury Bill at 5.00 Bid - 4.90 Ask. If interest rates rise, then the expected maturity of a CMO tranche will lengthen, due to a lower prepayment rate than expected. The segmented class of assets determines the amount that traders will receive when their bonds reach maturity. For most investors this is too much money to invest, so they buy shares of a Ginnie Mae mutual fund instead. A. the same as the rate on an equivalent maturity Treasury Bond Each tranche has a different expected maturity, All of the following statements are true about "plain vanilla" CMO tranches EXCEPT: D. Treasury Stock, Which statements are TRUE when comparing Treasury Bills to Treasury STRIPS? The CDO market boomed until 2007 and then crashed and burned with the housing collapse of 2008-2009, when CDO holders discovered that their supposedly "lower risk" tranches defaulted. Prepayment risk CMO issues have the same market risk as regular pass-through certificates. Treasury Bills CMOs are subject to a lower degree of prepayment risk than the underlying pass-through certificates. 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. When interest rates rise, homeowners do not refinance their mortgages, and the prepayment rate will be lower than expected. Annual interest on the bonds is 3.25% of $5,000 face amount equals $162.50. The interest income on U.S. Government obligations and most agency obligations is subject to Federal income tax but is exempt from state and local tax. $$, Which of the following court decisions restricted the ability of public officials to sue the press for libel? CDOs - Collateralized Debt Obligations - are structured products that invest in CMO tranches (and they can also invest in other debt obligations that provide cash flows). A. Freddie Mac buys conventional mortgages from financial institutions A. Which of the following statements are TRUE regarding Treasury Stock? b. Sallie Mae Which statements are TRUE regarding Treasury debt instruments? The service limit is defined using policy statements in the tenancy. D. U.S. Government Agency Securities' accrued interest is computed on a 30 day month / 360 day year basis. Thus, payments are received monthly. Treasury bond purchasing power risk Which of the following statements regarding collateralized mortgage obligations are TRUE? Treasury note. During periods of falling interest rates, prepayments of mortgages in a pool are applied pro-rata to all holders of pass-through certificates. a. Each receipt is, essentially, a zero-coupon obligation, that is purchased at a discount, and which is redeemable at par at a pre-set date. The first 3 statements are true. Because interest will now be paid for a longer than expected period, the price rises. D. combined serial and series structures. Mutual fund shares are not a derivative, because Net Asset Value per share is a direct correlation to the value of total net assets divided by the number of shares outstanding. 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. Because the interest rate moves with the market, the price stays close to par - as is the case with any variable rate security. c. semi-annually The spread is: A floating rate CMO tranche is MOST similar to a: The best answer is B. A. term structures We are not the CEOs. Companion Because these T-Notes are trading at a premium, the yield to maturity will be lower than the current yield. \begin{array}{lcc} The best answer is C. CMBs are Cash Management Bills. c. treasury bonds a. weekly T-Bills trade at a discount from par I all rated AAAII rated based on the credit quality of the underlying mortgagesIII can be backed by sub-prime mortgagesIV cannot be backed by sub-prime mortgages. Treasury Bills If interest rates rise, then the expected maturity will lengthen, due to a lower prepayment rate than expected. II. It is primarily associated as a tranche of a collateralized mortgage obligation (CMO), which also. Extended maturity risk on the business day after trade date, through the Federal Reserve System CMOs are available in $1,000 denominations, as opposed to pass-through certificates that are $25,000 denominations. Macaulay durationD. GNMA Pass-Through Certificates. If the maturity lengthens, then for a given rise in interest rates, the price will fall faster, Which statements are TRUE about changes in market interest rates and collateralized mortgage obligations? The spread between the bid and ask is 2/32nds. 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). II. Ginnie Mae is backed by the guarantee of the U.S. Government, making it the highest credit rated agency security. IV. These trades are settled through GSCC - the Government Securities Clearing Corporation. Treasury STRIPS are quoted on a yield to maturity basis, Treasury Bills are quoted on a yield to maturity basis 13 weeks When compared to plain vanilla CMO tranches, Planned Amortization Classes have: A. higher extension riskB. 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. CMOs receive the same credit rating as the underlying pass-through securities held in trust Losses are first absorbed by the most junior (lower) classes. Thus, the certificate was priced as a 12 year maturity. prepayment speed assumptionC. If interest rates rise, then the expected maturity will lengthen A. corporation or trust through which investors pool their money in order to obtain diversification and professional management Which statements are TRUE about private CMOs? storm in the night central message Facebook-f object to class cast java Instagram. Governments, on which accrued interest is computed on an actual day month/actual day year basis, Agency securities' accrued interest is computed on a 30 day month/360 day year basis. An annual upward adjustment due to inflation is not taxable in that year; an annual downward adjustment due to deflation is tax deductible in that year. The CMO is rated dependent on the credit quality of the mortgages underlying mortgage backed pass through securities held in trust. I When interest rates rise, the price of the tranche falls II When interest rates rise, the price of the tranche rises III When interest rates fall, the price of the tranche falls IV When interest rates fall, the price of the tranche rises" Question: Q5. Since ETCs are secured by rolling stock, they are safer than Industrial revenue bonds, which are backed by lease payments made by a corporate lessee and the guarantee of that lessee. All of the following statements are true about Treasury Bills EXCEPT: A. the U.S. Treasury issues 1 week T- BillsB. A customer will buy at the ask price, which is 98 and 9/32nds = 98.28125% of $5,000 par = $4,914.06. Reinvestment risk is greater for Ginnie Maes than for U.S. C. Municipal bonds III. C. mortgage backed securities issued by a "privatized" government agency When interest rates rise, the price of the tranche fallsC. This is true because prepayments on pass-through certificates are allocated pro-rata. III. 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. I. Fannie Mae is a publicly traded company Older CMOs are known as plain vanilla CMOs, because the repayment scheme is relatively simple - as payments are received from the underlying mortgages, interest is paid pro-rata to all tranches; but principal repayments are paid sequentially to the first, then second, then third tranche, etc. ", An investor in 30 year Treasury Bonds would be most concerned with: Which statement is TRUE about floating rate tranches? Treasury Bills are original issue discount obligations. D. Any of the above. When this interest is received by the certificate holder, both the federal and state government want to recapture this interest income and tax it. d. taxable at maturity, taxable in that year as interest income received, Which CMO tranche is least susceptible to interest rate risk? on the same day as trade date c. T-bills have a maximum maturity of 9 months B. CMOs are available in $1,000 denominations. III. The holder is not subject to reinvestment risk, Which of the following statements are TRUE about Treasury Receipts? does not receive payments. A. credit risk principal amount remains at $1,000. So if you're in a war, and the war is "Invasion of the Body Snatchers" where you don't know who is compromised (and was why that movie was made), then people die in a war. Government National Mortgage Association Pass Through Certificates. individuals seeking current income a. purchasing power risk A. C. Industrial Revenue Bond individual wishing to avoid reinvestment risk, money market funds how to build a medieval castle in minecraftEntreDad start a business, stay a dad. A. PAC tranche If interest rates drop, the market value of the CMO tranches will increase. Finally, each American Depositary Receipt represents a fixed number of foreign shares held in trust. Primary dealers are expected to bid in weekly Treasury auctions, and must make a secondary market in all U.S. Government issues. Principal repayments on a CMO are made: B. mutual fund taxable in that year as long term capital gainsD. D. Treasury Stock, Which of the following are TRUE statements about Treasury Bills? A. GNMA securities are guaranteed by the U.S. Government ** New York Times v. United States, $1974$ But we've saved 90% of the people and identified most of the alien overlords and their centers. Which of the following statements are TRUE about CMOs? C. Treasury Bonds State income tax onlyC. c. risks of default if homeowners do not make their mortgage payments An official statement issued by the finance ministry said the estimated shortfall of 1.1 trillion, assuming all states opt for borrowing, will be borrowed by central government in tranches and passed on to states "as a back-to-back loan in lieu of GST Compensation cess releases." are stableD. They are the shortest-term U.S. government security, often with maturities as short as 5 days. a. reduce prepayment risk to holders of that tranche A. interest accrues on an actual day month; actual day year basis The housing bubble that ended badly in 2008 with a market crash was fueled by massive issuance of sub-prime mortgages to unqualified home buyers, that were then packaged into CDOs and sold to unwitting institutional investors who relied on the credit rating assigned by S&P or Moodys. B. a dollar price quoted to a 5.00 basis Treasury Receipts, All of the following are true statements about U.S. Government Agency securities EXCEPT: CDO tranches are: Companion classes are split off from the Planned Amortization Class (PAC) and act as buffers absorbing prepayment and extension risk prior to this risk being applied to the PAC tranche. semi-annuallyD. C. Freddie Mac is a corporation that is publicly traded I. T-Notes are sold by competitive bidding at auction conducted by the Federal Reserve III. chelcee grimes wedding pictures; $81.25 U.S. Government Agency Securities trade flat This interest income is subject to both federal income tax and state and local tax. Even though the interest rate is fixed, the holder receives a higher interest payment, due to the increased principal amount. Treasury STRIPS are suitable investments for individuals seeking current income Treasury billD. Extension risk is the risk that the maturity will be longer than expected - during which longer period, the holder receives a lower than market rate of interest. b. A 70-year old customer who is looking for current income has inquired about purchasing a GNMA pass-through certificate because he has heard that it provides monthly payments. b. treasury notes II. Treasury Receipts, Treasury Bills 19-29 Cash Flows for GNMA IO and PO If interest rates drop, the market value of CMO tranches will decrease Principal only strips are. $.0625 per $1,000 A. GNMA is empowered to borrow from the Treasury to pay interest and principal if necessary Treasury STRIPS A customer buys 5M of the notes. D. Companion. Therefore, as interest rates move up, the interest rate paid on the tranche steps up as well; and when interest rates drop, the interest rate paid on the tranche steps down as well. Which statements are TRUE regarding the principal repayments for Companion CMO tranches? "5M" means that 5-$1,000 bonds are being purchased (M is Latin for $1,000). I The investor locks in a rate of return that is free from reinvestment risk if the Receipt is held to maturityII The underlying bonds are held by a trustee for the beneficial ownersIII The interest income on the Receipts is subject to Federal income tax annuallyIV The Receipts are issued by broker-dealers, who maintain a secondary market in these securities, A. III and IV onlyB. 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. Zero Tranche. If the maturity lengthens, then for a given rise in interest rates, the price will fall faster. Note, however, that the PSA can change over time. \begin{array}{c} III. Notice that the fact that the bond is trading at a discount is irrelevant - the interest payment is based on the stated interest rate times par value. Agency CMOs are traded in the public markets while Private Label CMOs can only be sold in private placements and cannot be traded Salesforce 401 Dev Certification Questions Answers Part 1. Collateralized mortgage obligation values are derived from the underlying mortgage backed pass-through certificates held in trust by recutting the cash flows and applying them to the CMO tranches. CMOs have investment grade credit ratings C. 10 mortgage backed pass through certificates at par $4,914.06 C. A TAC is a variant of a PAC that has a higher degree of extension risk Older CMOs are known as "plain vanilla" CMOs, because the repayment scheme is relatively simple - as payments are received from the underlying mortgages, interest is paid pro-rata to all tranches; but principal repayments are paid sequentially to the first, then second, then third tranche, etc. b. the securities are sold at a discount Treasury Bonds have minimum maturity of more than 10 years, Which investment does NOT have purchasing power risk? I. Fannie Mae is a publicly traded company d. Freddie Mae, Which of the following would NOT purchase STRIPS? lower prepayment risk a. interest is paid at maturity Treasury Bonds I Payments are larger in the early yearsII Payments are smaller in the early yearsIII Payments are larger in the later yearsIV Payments are smaller in the later years. A. Which two statements are true about service limits and usage? $25 per $1,000. Whereas CMOs backed by Fannie, Freddie or Ginnie mortgage-backed securities are rated AAA, the rating of "private label" CMOs is dependent on the credit quality of the underlying mortgages. All of the following statements are true about PAC tranches EXCEPT: A. the U.S. Treasury issues 26 week T- BillsD. Also note that even though Standard and Poors downgraded Treasury Debt to an AA+ rating in the summer of 2011, Moodys and Fitchs retained their AAA ratings. receives payments after all other tranchesC. Which of the following statements are TRUE when comparing the Planned Amortization Classes (PAC tranches) to the Companion Classes of a CMO? a. interest accrues on an actual day month; actual day year basis Treasury securities are the safest investment - they have virtually no credit risk (default risk) and almost no marketability risk. D. have the same prepayment risk as companion classes. Thus, the certificate was priced as a 12 year maturity. I. What is the scientific name of apple? Non-callable funded debtC. The principal portion of a fixed rate mortgage makes smaller payments in the early years, and larger payments in the later years. a. CMO III. holders of PAC CMO trances have higher prepayment risk $$ coupon rate remains at 4% how to ultimate male vitamin; sildenafil (viagra) dick enlargment surgery; how to healthy natural lubricants; which drug for erectile dysfunction definition cialis 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. Freddie MacsC. Thus, the certificate was priced as a 12 year maturity. IV. II. (It is not a leap year.) I. Because the interest rate moves with the market, the price stays close to par - as is the case with any variable rate security. Thereby when interest rates increase, prices increase, and vice versa. are made monthly Most CMOs make payments to holders monthly; though there are some issues that pay quarterly or semi-annually. I. treasury bills Mortgage backed pass-through certificates are "paid off" in a shorter time frame than the full life of the underlying mortgages. 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. The fact that repayment is expected earlier than the life of the mortgages is based on the mortgage pools: A. standard deviation of returnsB. Treasury Bill Principal is paid after all other tranches, A floating rate CMO tranche is MOST similar to a: Money market instrumentB. The holder of a specific tranche of a CMO will only receive prepayments after all earlier tranche holders are repaid. Which of the following securities has the lowest level of credit risk? Home . A. Accrued interest on the certificates is computed on an actual day month / actual day year basis Each tranche has a different level of credit risk IV. Only mortgage backed pass-through certificates are used as the backing for CMOs - and Ginnie Mae (Government National Mortgage Assn. Thus, the prepayment rate for CMO holders will increase. IV. During periods of falling rates, all certificate holders receive their share of those repayments pro-rata. All of the statements are true about CMOs. II. Dealers typically quote agency securities, including Ginnie Maes, on a basis point differential to equivalent maturing U.S. True, the transition to the post-growth era won't be easy for the CCP or the Chinese people if income and wages level off or worsen, and if a declining tax base can't sustain an aging population. III. Treasury Notes Collateralized mortgage obligation values are derived from the underlying mortgage backed pass-through certificates held in trust by recutting the cash flows and applying them to the CMO tranches. B. I. Thus, PACs have lower prepayment risk than plain vanilla CMO tranches. I. the trading market is very active, with narrow spreads Thus, the interest rate on a short-term T-Bill is the pure interest rate - the same thing as the risk-free rate of return. I. Private CMOs (Collateralized Mortgage Obligations) are also called private label CMOs. U.S. Government and agency bond trades settle in Federal Funds, which are good funds the business day of the funds transfer (next business day for regular way settlement of government securities). Ginnie Mae obligations trade at higher yields than Fannie Mae obligations However, Interest Only tranche is quite different from a typical bond, simply because when market interest rate increases the rate of prepayment decreases, which in turn makes the rate of maturity to be longer. If Treasury bill yields are dropping at auction, this indicates that: Ginnie Mae bonds are traded Over the Counter, Ginnie Mae is a U.S. Government Agency Prepayment speed assumption Governments. There are approximately 20 such firms. Which statements are TRUE about CMO Targeted Amortization Class (TAC) tranches? Thus, the earlier tranches are retired first. lower extension riskC. which statements are true about po tranches +1 (786) 354-6917 which statements are true about po tranches info@ajecombrands.com which statements are true about po tranches. III. ** New York Times v. Sullivan, $1964$ when interest rates fall, prepayment rates rise, CMO "planned amortized classes" (PAC tranches): Regarding the Student Loan Marketing Association (Sallie Mae) which of the following statements are TRUE? "5M" means that the customer is buying $5,000 par value of the notes (M is Latin for $1,000). Tranches onward. A. A TAC bond protects against prepayment risk; but does not offer the same degree of protection against extension risk. Principal repayments made earlier than that required (earlier than expected) to retire the PAC at its maturity are applied to the Companion class; while principal repayments made later than expected are applied to the PAC maturity before payments are made to the Companion class. C. $162.50 I. FNMA is a publicly traded corporation Both securities are issued by the U.S. Government A companion tranche is a class, or type, of tranche, which is a portion of a debt or security. The note pays interest on Jan 1 and Jul 1. c. taxable in that year as long term capital gains The Companion class is given a more certain maturity date than the PAC class Government agency securities are quoted in 32nds, similar to U.S. Government securities. Which statement is FALSE when comparing Agency CMOs to Private Label CMOs? REITs are common stock companies that make direct investments in real estate. CMO investors are subject to which of the following risks? \text{Available-for-sale investments, at cost}&\$90,000&\$86,000&\$102,000\\ Treasury Bills, The nominal interest rate on a TIPS approximates the: Payments to holders of Ginnie Mae pass-through certificates: 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. holders of "plain vanilla" CMO tranches have higher prepayment risk, Which CMO tranche is most susceptible to interest rate risk? Local income tax onlyD. Targeted amortization class Interest is paid after all other tranches why do ionic compounds have different conductivity; cricket 22 tactical stock; lesa france kennedy house; joe vicari obituary; liftfund harris county grant; recent murders in ontario; which statements are true about po tranches. IV. I. Ginnie Mae is a publicly traded company D. the trade will settle next business day if performed "regular way", the yield to maturity will be higher than the current yield The safest bonds listed are Treasury bonds (backed by the U.S. Government) and General obligation bonds (backed by unlimited municipal taxing power). Newer CMOs divide the tranches into PAC tranches and Companion tranches. Sallie Mae is wholly owned by the U.S. Government An IO is an Interest Only tranche. Plain vanilla CMO tranches are subject to both prepayment and extension risks. when interest rates fall, prepayment rates rise Each CMO tranche has an expected maturity, but the actual repayments are based on the rate of principal repayments that come in from the underlying mortgages - and this rate can vary. A 5 year 3 1/2% Treasury Note is quoted at 101-4 - 101-8. which statements are true about po tranchesdead island crossplay xbox pcdead island crossplay xbox pc D. the credit rating is considered the highest of any agency security, the credit rating is considered the highest of any agency security, Which of the following statements are TRUE about the Federal National Mortgage Association (FNMA)? c. 96 mortgages on privately owned homes and apartments. A. CMBs are used to smooth out cash flow II. The fact that repayment is expected earlier than the life of the mortgages is based on the mortgage pool's: C. Companion Class Thus, CMOs give holders a form of call protection not available in regular pass-through certificates. CMOs divide the cash flows into tranches of varying maturities; and apply prepayments sequentially to the tranches in order of maturity. I. \textbf{Highland Industries Inc.}\\ a. Interest is paid before all other tranches D. When interest rates rise, the interest rate on the tranche rises, When interest rates rise, the price of the tranche falls, Which statement is TRUE about IO tranches? II. Treasury "STRIPS" and Treasury Receipts are bonds which have been stripped of coupons - essentially they are zero coupon Treasury obligations. This is true because when the certificate was purchased, assume that the average life of the underlying 15 year pool (for example) was 12 years. The interest coupons are sold off separately from the principal portion of the obligation A. III. ), and Freddie Mac (Federal Home Loan Mortgage Corp.) all issue pass-throughs. 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. The Federal Reserve would permit which of the following to be "primary" U.S. Government securities dealers? The best answer is C. The bond is quoted at 95 and 24/32nds. When interest rates fall, mortgage backed pass through certificates rise in price - at a slower rate than for a regular bond. When all of the interest is paid, the "notional principal" has been brought to par and the security is now paid off. T-bills are issued in bearer form in the United States I When interest rates rise, mortgage backed pass through certificates fall in price faster than regular bonds of the same maturityII When interest rates rise, mortgage backed pass through certificates fall in price slower than regular bonds of the same maturityIII When interest rates fall, mortgage backed pass through certificates rise in price faster than regular bonds of the same maturityIV When interest rates fall, mortgage backed pass through certificates rise in price slower than regular bonds of the same maturity, A. I and IIIB. There could be more than one bond class (or tranche), and bond classes vary depending on how they will share any losses resulting from borrowers' defaults (or prepayment, which we will see later). II. Plain Vanilla A. This is a tranche that only receives the interest payments from an underlying mortgage, and it is created with a corresponding PO (Principal Only) tranche that only receives the principal payments from that mortgage. C. C. CMBs are sold at a regular weekly auction I CMOs make payments to holders monthlyII CMOs receive the same credit rating as the underlying pass-through securities held in trustIII CMOs are subject to a lower level of prepayment risk than the underlying pass-through certificatesIV CMOs are available in $1,000 denominations, A. II, III, IVB. III. $35.00 Foreign broker-dealers All of the following statements are true regarding GNMA "Pass Through" Certificates EXCEPT: Which of the following statements are TRUE regarding the settlement of trades in U.S. Government bonds?