Podcast
Questions and Answers
What is a bond that only pays interest if the issuer has sufficient income?
What is a bond that only pays interest if the issuer has sufficient income?
What describes a speculative-grade bond that offers high yield and high risk?
What describes a speculative-grade bond that offers high yield and high risk?
What is an unsecured corporate bond of good quality that provides fixed income?
What is an unsecured corporate bond of good quality that provides fixed income?
What is a zero coupon Treasury that pays par at maturity?
What is a zero coupon Treasury that pays par at maturity?
Signup and view all the answers
Which CMO tranche has the longest maturity and is the last to be paid?
Which CMO tranche has the longest maturity and is the last to be paid?
Signup and view all the answers
What is the high-risk option strategy used to generate income through premiums?
What is the high-risk option strategy used to generate income through premiums?
Signup and view all the answers
What type of stock provides stable dividends and does not allow for voting?
What type of stock provides stable dividends and does not allow for voting?
Signup and view all the answers
What type of stock shares in earnings growth and is considered a long-term investment?
What type of stock shares in earnings growth and is considered a long-term investment?
Signup and view all the answers
What is a debt instrument that pays principal and interest on a monthly basis?
What is a debt instrument that pays principal and interest on a monthly basis?
Signup and view all the answers
What is a bond issued at a deep discount that pays par at maturity?
What is a bond issued at a deep discount that pays par at maturity?
Signup and view all the answers
Which type of stock provides a steady dividend and is considered low-risk?
Which type of stock provides a steady dividend and is considered low-risk?
Signup and view all the answers
What type of mutual fund holds mid-cap stocks and aims for long-term growth?
What type of mutual fund holds mid-cap stocks and aims for long-term growth?
Signup and view all the answers
What kind of retirement savings requires one spouse to have earned income?
What kind of retirement savings requires one spouse to have earned income?
Signup and view all the answers
What involves investing a lump sum that is immediately annuitized?
What involves investing a lump sum that is immediately annuitized?
Signup and view all the answers
What describes money invested over time and annuitized in the future?
What describes money invested over time and annuitized in the future?
Signup and view all the answers
What is a state-sponsored, college savings plan that offers tax-free earnings?
What is a state-sponsored, college savings plan that offers tax-free earnings?
Signup and view all the answers
What provides a predetermined schedule of principal repayments based on mortgage prepayment speeds?
What provides a predetermined schedule of principal repayments based on mortgage prepayment speeds?
Signup and view all the answers
What provides protection from contraction risk and not from extension risk?
What provides protection from contraction risk and not from extension risk?
Signup and view all the answers
Study Notes
Bond Types
- Income Bonds: Pay interest only if the issuer has sufficient income; categorized as high-risk junk bonds.
- High-yield Bonds: Speculative-grade bonds providing higher yields but carrying significant risk; associated with potential high income.
- Investment Grade Debentures: Unsecured corporate bonds of good quality, providing fixed income opportunities with average to low risk.
- Zero-Coupon Bonds: Issued at a deep discount; pay par value at maturity and do not offer periodic interest payments.
- T-STRIPS: Zero coupon Treasury securities that provide fixed growth, maturing at par value without interim income.
Mortgage-Backed Securities
- CMO Z Tranche: CMO tranche with the longest maturity and the last to be paid; does not offer monthly income.
- Collateralized Mortgage Obligation (CMO): A debt instrument that pays principal and interest monthly, but has uncertain maturity.
Stocks
- Preferred Stock: Non-voting equity that provides stable dividends, offering fixed income until sold.
- Common Stock: Voting equity shares that enable earnings growth and potential dividends; viewed as long-term growth investments.
- Utility Stocks: Stable equities known for providing consistent dividends, characterized by low risk.
Investment Funds
- Mid-Cap Stock Fund: A mutual fund focused on mid-cap stocks aimed at providing long-term growth that exceeds inflation expectations.
Retirement Accounts and Annuities
- Traditional IRA: Requires earned income from one spouse; restricts contributions after age 70 and a half.
- Lump-Sum, Immediate Annuity: Immediate income provided from a single investment; can be fixed or variable, needs substantial upfront funds.
- Periodic Payment, Deferred Annuity: Investments made over time, deferred until retirement; not applicable for investment post-retirement.
- 529 Plan: State-sponsored college savings plan allowing tax-free earnings specifically for educational purposes, not retirement.
Bond Classifications
- Planned Amortization Class (PAC): Offers a set schedule for principal repayments, accounting for mortgage prepayment speeds within a specific range.
- Targeted Amortization Class (TAC): Provides protection against contraction risk with a shorter repayment schedule, while not addressing extension risk.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on key bond concepts with these flashcards tailored for the Series 7 exam. This quiz includes definitions and characteristics of various types of bonds, including income bonds and high-yield bonds. Perfect for anyone studying for financial certifications.
