CGFO Debt Administration 4

Question 1

What does GASB Statement No. 88 require governments to disclose regarding debt?

Accepted Answer

Additional information about direct borrowings and direct placements of debt

Answer

GASB 88 requires enhanced note disclosures for direct borrowings and direct placements, including unused lines of credit, assets pledged as collateral, and acceleration/termination clauses.

Question 2

Which credit rating is the lowest investment-grade rating assigned by Moody's Investors Service?

Accepted Answer

Baa3

Answer

Moody's lowest investment-grade rating is Baa3; ratings of Ba1 and below are considered speculative or non-investment grade.

Question 3

What is the primary function of the Municipal Securities Rulemaking Board (MSRB)?

Accepted Answer

To regulate broker-dealers and municipal advisors in the municipal securities market

Answer

The MSRB establishes rules governing broker-dealers and municipal advisors operating in the municipal securities market, protecting investors and issuers.

Question 4

Under IRS rules, what is the maximum period during which tax-exempt bond proceeds for a capital project must be spent to avoid rebate liability under the 'spending exception'?

Accepted Answer

3 years

Answer

The IRS 3-year spending exception allows issuers to avoid arbitrage rebate if at least 75% of proceeds are spent within 18 months and 100% within 3 years.

Question 5

What is 'arbitrage' in the context of tax-exempt bond compliance?

Accepted Answer

Earning investment returns on bond proceeds that exceed the bond's yield, creating a profit from tax-exempt borrowing

Answer

Tax-exempt bond arbitrage occurs when an issuer invests proceeds at yields higher than the bond's yield, profiting from the difference between tax-exempt borrowing rates and taxable investment returns.

(CGFO) Certified Government Finance Officer Practice Test

(CGFO) Certified Government Finance Officer Practice Test

CGFO Debt Administration 4