CGFO Debt Administration 2

Question 1

Which document formally authorizes a local government to issue bonds by specifying the amount, purpose, and terms?

Accepted Answer

Bond resolution

Answer

A bond resolution is the authorizing legal document adopted by the governing body that establishes the terms and conditions of a bond issuance.

Question 2

What is the primary purpose of a debt service reserve fund?

Accepted Answer

To provide funds if revenues are insufficient to make debt service payments

Answer

A debt service reserve fund acts as a safety net, providing liquidity if pledged revenues fall short of scheduled principal and interest payments.

Question 3

Under SEC Rule 15c2-12, which entities are primarily responsible for filing continuing disclosure documents?

Accepted Answer

Issuers or obligated persons

Answer

SEC Rule 15c2-12 requires issuers and obligated persons to file annual financial information and material event notices with MSRB's EMMA system.

Question 4

A government issues $10 million in bonds at a net interest cost of 4.5%. What does the NIC measure?

Accepted Answer

The average coupon rate weighted by par amount only

Answer

Net Interest Cost (NIC) is the weighted average interest rate based on par amounts and coupon payments but does not account for the time value of money, unlike True Interest Cost (TIC).

Question 5

Which type of bond is secured solely by the full faith, credit, and taxing power of the issuing government?

Accepted Answer

General obligation bond

Answer

General obligation bonds are backed by the issuer's unlimited or limited taxing power, making them the broadest security pledge available to a government.

(CGFO) Certified Government Finance Officer Practice Test

(CGFO) Certified Government Finance Officer Practice Test

CGFO Debt Administration 2