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20 Cards in this Set
- Front
- Back
What are the three government securities?
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Treasury Bills
Treasury Notes Treasury Bonds |
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Characteristics of Treasury Bills
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-Sold at a discount
-The discount is the yield - Short term maturities (1 month, 3 month, 6 month, and 12 months - never more than 1 year) -Issued in denominations of $100* |
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Characteristics of Treasury Notes
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-Have a fixed coupon (or interest) rate
-Pays interest semi-annually -Sold in Denominations of $1,000 - 2 - 10 year maturities -Never have a call option |
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Characteristics of Treasury Bonds
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-Have a fixed coupon (or interest) rate
-Pays interest semi-annually -Sold in Denominations of $1,000 -10 - 30 year maturities - Can be issued with a call option - 30 year bond is AKA "THE LONG BOND" |
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Name and describe the three parties in T-Bill auctions
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Federal Reserve - Sells the T-Bills
Primary Dealers - Brokerages and Banks recognized by the Federal Reserve Public - Normal people |
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How often do T-Bills go to auction?
(2 separate answers) |
Three and six month T-bills are auctioned off weekly
Year long T-Bills are auctioned monthly |
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During a T-Bill Auction, who gets to act first Who acts after that?
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During a T-Bill auction, non-competitive orders are filled first. This means the public gets the first crack. Afterwards Primary dealers (competitive) bid on the T-Bills
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What is "competitive tender price?"
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The competitive tender price is the AVERAGE price of all the competitive bids.
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What are the two trade ways for Gov't Securities?
(Hint think T-Bills) |
Government Securities are sold T+3.
The one exception is T-Bills sold at AUCTION. That is T+1 |
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What's different about a T-Bill's bid and ask (quote)? Why?
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Bid is higher than ask.
This is because the quote is actually quoting the DISCOUNT, not the PRICE. Subtract the discount from the par value to get the real picture. |
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Basis Points on a T-Bill are equal to?
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1 basis point on a T-BIll equals:
$100 - 12 month $50 - 6 month $25 - 3 month |
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T-Bills are risk free because...?
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They are short term and guaranteed by the federal governement
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TIPS are auctioned in which months?
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July
October January |
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Which government securities preserve the investor's capital BEST?
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TIPS! Because the interest rate is adjusted for inflation by tying it to the CPI - Consumer Price Index
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How to determine days in a month
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Put your fists together.
Every knuckle has 31 days. (JULY AND AUG together) |
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Fanny Mae, Ginnie Mae, and Freddy Mac (all mortgage government agencies) have interest income and it is taxable at which level(s)?
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The interest income is fully taxable at the federal, state, and local levels. FULLY TAXABLE.
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Sallie Mae has nothing to do with (2 things)
Sallie Mae has to do with? |
Sallie Mae has nothing to do with mortgages or options.
Sallie Mae is concerned with Student Loans |
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Each Federal Farm District contains 3 banks:
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Federal Land Bank
Federal Intermediate Credit Bank Bank for Cooperatives |
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Federal Intermediate Credit Banks cover what?
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Cover farm operating expenses
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What are STRIPS?
What is the only underlying security of STRIPS? |
Separate Trading of Registered Interest and Principal Securities
The underlying security is Treasury Bonds |