Reading 64: Overview of Bond Sectors and Instruments - LO

答案和详解如下：

1.Which of the following statements regarding separate trading of registered interest and principal of securities (STRIPS) is TRUE? A 20-year Treasury bond can be used as the basis for:

A)    40 coupon strips and 1 principal strip.

B)    40 principal strips and 1 coupon strip.

C)    41 principal strips.

D)    41 coupon strips.

The correct answer was A)

A 20-year Treasury bond can be used as the basis for 40 coupon strips and 1 principal strip.

2.Which of the following statements about Treasury securities is FALSE?

A)    Designated government securities dealers can buy treasuries, strip out the coupons and principal, and reissue these stripped cash flows as zero-coupon bonds.

B)    Separate trading of registered interest and principal of securities (STRIPS) are taxed by the Internal Revenue Service on their implicit interest.

C)    Taxable investors holding zero-coupon bonds can have negative cash flows prior to maturity.

D)    The U.S. Treasury auctions 10-year Notes weekly.

The correct answer was D)

U.S. Treasury Notes are issued quarterly. All of the other statements are true. It is possible that taxable investors will have negative cash flows from holding zero-coupon securities, since there is no cash income, but taxes must be paid at least annually on the implicit interest.

3.Which of the following statements about the taxation of separate trading of registered interest and principal of securities (STRIPS) is FALSE?

A)    Treasury STRIPS can be based upon either coupon payments or principalpayments.

B)    A 10-year Treasury note has 20 coupons and 1 principal payment.

C)    The STRIPS program began in 1985.

D)    Implicit interest taxation is a paramount issue for pension plans.

The correct answer was D)

Pension plans are not taxable entities so they do not have to worry about implicit interest taxation. All of the other statements are true.

4.Which of the following refers to the U.S. Treasury bonds that are sold in the form of zero-coupon securities?

A)    Treasury calls.

B)    Strip-Ts.

C)    Zero-matics.

D)    Pass-throughs.

The correct answer was B)

The U.S. Treasury does not issue zero coupon notes and bonds, therefore investment bankers began stripping the coupons from Treasuries to create synthetic zeros to meet investor demand. The Separate Trading of Registered Interest and Principal Securities (STRIP) was introduced in 1985 to meet this need.