CPFO COMPLETE REVIEW 2026
QUESTIONS WITH SOLUTIONS GRADED A+
◉Original Issue Discount. Answer: When an issuer receives fewer
proceeds than the par amount, but pays coupon interest on the
bonds that are lower than the market rate.
◉Credit Enhancement. Answer: Bond insurance or letters of credit
that provide added assurance to investors the principal and interest
payments will be made on time and in full
Bonds sold with credit enhancement carry the rating of the credit
provider
◉Bond Insurance. Answer: A type of credit enhancement purchased
for the term of the bonds; premium is based on the amount of debt
service expected to be paid, and is generally less costly than letters
of credit.
◉Letter of Credit. Answer: A type of credit enhancement typically
purchased for a term shorter than the life of the bonds; may have to
be renewed periodically at the discretion of the letter of credit bank;
generally more expensive than bond insurance
, ◉Serial Bonds. Answer: Bonds in which a specific principal amount
of bonds is retired each year throughout the life of the bonds
◉Term Bonds. Answer: Bonds in which a large part, or all, of a bond
issue comes due in a single maturity
◉Capital Appreciation Bond. Answer: A bond that is issued at par
where interest accrues at a stated rate until the final maturity when
it is paid as a lump sum
◉Level Principle Debt Service Schedule. Answer: A debt payment
schedule where principal is retired evenly over the life of the bonds;
therefore total debt service decreases as interest decreases
◉Redemption Provision. Answer: A provision that allows bond
issuers to redeem or "call" outstanding securities prior to final
maturity
◉Call Premium. Answer: The price above the par value of the bonds
that the issue were must pay to exercise the call option
◉Level Total Debt Service Schedule. Answer: A debt payment
schedule where early debt service payments primarily cover interest
costs, and principal repayment increases over the life of the bonds
QUESTIONS WITH SOLUTIONS GRADED A+
◉Original Issue Discount. Answer: When an issuer receives fewer
proceeds than the par amount, but pays coupon interest on the
bonds that are lower than the market rate.
◉Credit Enhancement. Answer: Bond insurance or letters of credit
that provide added assurance to investors the principal and interest
payments will be made on time and in full
Bonds sold with credit enhancement carry the rating of the credit
provider
◉Bond Insurance. Answer: A type of credit enhancement purchased
for the term of the bonds; premium is based on the amount of debt
service expected to be paid, and is generally less costly than letters
of credit.
◉Letter of Credit. Answer: A type of credit enhancement typically
purchased for a term shorter than the life of the bonds; may have to
be renewed periodically at the discretion of the letter of credit bank;
generally more expensive than bond insurance
, ◉Serial Bonds. Answer: Bonds in which a specific principal amount
of bonds is retired each year throughout the life of the bonds
◉Term Bonds. Answer: Bonds in which a large part, or all, of a bond
issue comes due in a single maturity
◉Capital Appreciation Bond. Answer: A bond that is issued at par
where interest accrues at a stated rate until the final maturity when
it is paid as a lump sum
◉Level Principle Debt Service Schedule. Answer: A debt payment
schedule where principal is retired evenly over the life of the bonds;
therefore total debt service decreases as interest decreases
◉Redemption Provision. Answer: A provision that allows bond
issuers to redeem or "call" outstanding securities prior to final
maturity
◉Call Premium. Answer: The price above the par value of the bonds
that the issue were must pay to exercise the call option
◉Level Total Debt Service Schedule. Answer: A debt payment
schedule where early debt service payments primarily cover interest
costs, and principal repayment increases over the life of the bonds
