False Bond Statements Confused Explanation

FINRA FINRA Series 7
1

I am confused by the explanation to this question: Which of the following statements are false?

new issue us govt bonds sold at discount must be accreted
premium municipal bonds purchased in secondary market must me amortized
premium us govt bonds purchased in secondary market must me amortized
new issue municipal bonds sold at a discount must be accreted

the explanation for the 3rd statement being the correct answer (false) is Secondary Market (SP) corporate bonds have the choice of being amortized or not. there is no requirement for amortization to happen.

I understand the lack of requirement for amortization to happen for secondary market corporate bonds, but the correct answer is talking about premium us government bonds, not secondary market corporate bonds. Are premium us government bonds secondary market corporate bonds? I don’t believe so. Help.

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2

Hi, I’ll do my best to clarify, but I’m limited in how much I can help without seeing the specific question. If you have questions about Achievable quizzes, please use the feedback icon :email: in the top right corner of the quiz - this gives us information about the specific question you’re looking at.

What you’ve described seems accurate. I think the missing point is that US Government bonds and corporate bonds have the same amortization rules - take a look at the image below.

Mayhammer

3

SD, SP acronymns written out? Secondary discount, premium?

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4

Yep, that’s right!

  • OID = original issue discount
  • OIP = original issue premium
  • SD = secondary market discount
  • SP = secondary market premium