Municipal Analysis and Pricing: Rapid Fire
Chapters in this video
- 0:00 GO bonds versus revenue bonds: credit analysis split
- 0:33 Net direct debt and overlapping debt exclusions
- 1:22 Revenue bond coverage ratios and flow of funds
- 2:51 Pricing conventions, accrued interest, and 30/360
- 4:48 Premium amortization, OID accretion, and taxable equivalent yield
- 5:40 Bond Buyer indexes: weekly yields versus daily price
- 6:16 Exam gotcha traps: flat trading, de minimis, and yield to call
- 7:29 Rapid-fire exam recap
What this video covers
- How general obligation (GO) bonds rely on full faith, credit, and taxing power while revenue bonds rely on project-specific cash flows, and which debt ratios apply to each
- Why net direct debt excludes self-supporting revenue bonds, and why overlapping debt excludes state debt
- What debt service coverage ratio (DSCR) measures, and why utility revenue bonds need only 1.25x coverage while standard revenue bonds need 2.0x
- The memory aid for gross pledge (bondholders given priority) versus net pledge (bondholders not paid until operations and maintenance are handled)
- How term bonds quote in dollar price while serial bonds quote in yield to maturity (basis), and how 30/360 day count treats February as 30 days for accrued interest
- The tax distinction between premium amortization (mandatory, not deductible), original issue discount (OID) accretion (tax-free), and market discount (ordinary income)
- What taxable equivalent yield (TEY) is, why you always divide the tax-exempt yield by one minus the marginal tax rate, and which Bond Buyer indexes publish weekly versus daily
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