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41 multiple-choice questions and 42 flashcards on Debt Securities, about 7% of the Series 7 FINRA bank. Every one carries a written rationale.
Debt Securities is one of 9 chapters in CoStudy's Series 7 (FINRA) bank, and it holds 41 of the bank's 630 multiple-choice questions — roughly 7% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
10 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
A house call requires the customer to deposit additional:
Answer: D — Equity to meet the call
A) Any acceptable asset works. B) Preferred alone not required. C) Bonds alone are not required. D) Correct — meet house maintenance level.
A corporate bond trades between coupon dates. At settlement, the buyer must generally pay the seller:
Answer: D — Accrued interest from the last coupon date to settlement
B) Correct — the buyer compensates the seller for interest accrued since the last coupon date. A) The buyer doesn't prepay the entire next coupon, only the accrued portion. C) Prepayment penalties relate to early redemption, not routine secondary trades. D) Ignoring accrued interest would let the buyer capture interest they didn't earn.
Bond duration measures:
Answer: D — A bond's price sensitivity to interest rate changes
A) That is total return, not duration. D) Correct — duration estimates the percent price change for a given yield change. C) That is maturity, a related but distinct concept. B) Credit risk is measured by ratings, not duration.
A house call requires the customer to deposit additional:
Answer: D — Equity to meet the call
A) Any acceptable asset works. B) Preferred alone not required. C) Bonds alone are not required. D) Correct — meet house maintenance level.
A bond is purchased at a discount to par. Which ranking of its yields is correct?
Answer: B — Yield to maturity > Current yield > Nominal yield
B) Correct — for a discount bond, YTM is highest (captures price appreciation to par), then current yield, then nominal (coupon) yield lowest. A) This ranking applies to a PREMIUM bond, not a discount bond. C) Current yield does not exceed YTM on a discount bond. D) The three yields are equal only at par, not at a discount.
Which security is a direct obligation of the U.S. Treasury?
Answer: B — Ten-year Treasury note
A) Fannie Mae is a GSE. B) Correct — full faith and credit backing. C) GNMA is guaranteed, issued by lenders. D) FHLB is a GSE.
A customer's stated risk tolerance is 'low.' The BEST fixed-income choice is:
Answer: C — Investment-grade Treasuries
A) High-yield is high risk. B) Emerging debt carries credit risk. C) Correct — Treasuries are lowest credit risk. D) Non-rated notes are illiquid.
Commercial paper is BEST described as:
Answer: B — Short-term unsecured corporate debt paper
A) Commercial paper is short-term. B) Correct — CP matures in 270 days or less and is exempt from registration. C) CP is not government-guaranteed. D) That is a negotiable CD, a different product.
T-bills are quoted on a:
Answer: D — Discount yield basis with 360-day year and face value
A) T-bills have no coupon. B) Bond-equivalent conversion is used for comparison, not native quoting. C) T-bills are not quoted from a futures curve. D) Correct — T-bills quote on discount yield with 360-day year.
A municipal issue structured so that portions of the principal mature every year over a 20-year period is BEST described as a:
Answer: D — Serial bond
B) Correct — staggered annual maturities define a serial bond structure. A) A term bond matures entirely on one date. C) Zero-coupon bonds are defined by their lack of periodic interest, not maturity structure. D) Perpetual bonds never mature at all.
4 cards from the 42 in this chapter.
How does call risk affect a premium bond?
A premium bond (priced above par because its coupon exceeds market rates) is more likely to be called by the issuer, capping the investor's upside and shortening the effective holding period.
What is the yield curve?
Graph of bond yields vs. maturities. Normal (upward) = growth expected. Inverted (downward) = recession signal. Flat = uncertainty.
An investor buys a zero-coupon bond at $600, maturing at $1,000 in 10 years. How is the gain reported?
The annual accretion (~$40/year) must be reported as ordinary interest income each year (phantom income), even though no cash is received.
What is a money market fund?
A mutual fund investing in short-term, high-quality debt (T-bills, commercial paper, repos). Seeks stable NAV of $1. Low risk, low return.
These are a sample. The full Debt Securities chapter runs 83 items with per-chapter progress tracking, on the web and in the iOS app.
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