CGFO Treasury Operations & Cash Management 4

Question 1

A government treasury officer discovers that an investment maturity schedule creates a 'concentration risk.' This means:

Accepted Answer

Too many investments are held in a single maturity period, creating reinvestment or liquidity risk

Answer

Concentration risk in maturity scheduling means too many securities mature at the same time, potentially forcing reinvestment at unfavorable rates or creating liquidity gaps.

Question 2

Which of the following is a key advantage of using a local government investment pool (LGIP) for public fund investment?

Accepted Answer

Daily liquidity, professional management, and economies of scale for smaller governments

Answer

LGIPs provide smaller governments with daily liquidity, access to professional portfolio management, and cost efficiencies unavailable when investing independently.

Question 3

What is the 'duration' of an investment portfolio, and why does it matter to a government treasurer?

Accepted Answer

A measure of price sensitivity to interest rate changes; higher duration means greater market risk

Answer

Duration measures how much a bond's price changes with a 1% change in interest rates; a higher duration portfolio carries greater market value risk in rising rate environments.

Question 4

A government's bank reconciliation reveals 'outstanding checks' totaling $500,000. These represent:

Accepted Answer

Checks issued by the government but not yet cleared the bank

Answer

Outstanding checks are checks the government has issued and recorded as disbursements but that have not yet been presented to and cleared the bank.

Question 5

Under GASB standards, unrealized gains and losses on investments reported at fair value should be:

Accepted Answer

Recognized in the period in which they occur as investment income or loss

Answer

GASB requires that changes in fair value of investments be recognized as investment income or loss in the period they occur.

(CGFO) Certified Government Finance Officer Practice Test

(CGFO) Certified Government Finance Officer Practice Test

CGFO Treasury Operations & Cash Management 4