CSIA Final Exam Version 1 Questions And Answers
Practice Questions with Solutions Newest | Already
Graded A+
SECTION I: INVESTMENT & FUND MANAGEMENT
1. A school district has a surplus of $5 million in its Debt Service Fund
that will not be needed for 18 months. The district's investment
policy prioritizes safety and liquidity. Which of the following
investment vehicles is the MOST appropriate for these funds?
A) 10-year U.S. Treasury Bonds
B) High-yield corporate bonds
C) A 12-month Certificate of Deposit (CD) with a federal institution
D) Common stock in a blue-chip technology company
Correct Answer: C Rationale: The investment policy prioritizes safety and
liquidity. A 12-month CD is insured (by FDIC/NCUA) and matures before
the funds are needed, providing both safety and liquidity. Option A (10-
year bonds) fails the liquidity test because they mature beyond the 18-
month horizon and are subject to interest rate risk. Option B and D violate
the safety principle due to credit risk and market volatility, which are
prohibited for public school funds under most state statutes.
2. When calculating the "Weighted Average Maturity" (WAM) of a
school district's investment portfolio, a lower WAM generally
indicates:
A) Higher yield potential but greater interest rate risk.
B) Lower yield potential but reduced exposure to interest rate fluctuations.
, C) Higher credit risk exposure.
D) A violation of the district's arbitrage rebate requirements.
Correct Answer: B Rationale: Weighted Average Maturity measures the
average time until the investments in a portfolio mature. A lower WAM
means the portfolio's securities will mature sooner, reducing the portfolio's
sensitivity to changes in interest rates (i.e., less interest rate risk).
However, shorter maturities typically offer lower yields compared to
longer-term securities. Option A is the opposite. Option C is unrelated to
maturity. Option D refers to federal tax compliance, not WAM.
3. Under updated GASB (Governmental Accounting Standards Board)
standards effective for fiscal years beginning after June 15, 2025,
which of the following is a NEW requirement for school district
investment disclosures?
A) Disclosure of the average credit rating of all investments.
B) Disclosure of investments measured at fair value, categorized into a
three-level hierarchy based on valuation inputs.
C) Disclosure of the names of all individual brokers used in the prior year.
D) Disclosure of the district's internal investment committee meeting
minutes.
Correct Answer: B Rationale: GASB Statement No. 72 (and subsequent
updates) requires fair value measurement and disclosure using a hierarchy
(Level 1, 2, and 3 inputs) to increase transparency about how investment
values are determined. While credit ratings are important (Option A), they
are not a new requirement under the latest update. Options C and D are not
standard GASB disclosure requirements.
SECTION II: DEBT MANAGEMENT & BOND ISSUANCE 4. A school
district is preparing to issue general obligation bonds to fund a new high
school. The district's financial advisor recommends a "competitive sale"
Practice Questions with Solutions Newest | Already
Graded A+
SECTION I: INVESTMENT & FUND MANAGEMENT
1. A school district has a surplus of $5 million in its Debt Service Fund
that will not be needed for 18 months. The district's investment
policy prioritizes safety and liquidity. Which of the following
investment vehicles is the MOST appropriate for these funds?
A) 10-year U.S. Treasury Bonds
B) High-yield corporate bonds
C) A 12-month Certificate of Deposit (CD) with a federal institution
D) Common stock in a blue-chip technology company
Correct Answer: C Rationale: The investment policy prioritizes safety and
liquidity. A 12-month CD is insured (by FDIC/NCUA) and matures before
the funds are needed, providing both safety and liquidity. Option A (10-
year bonds) fails the liquidity test because they mature beyond the 18-
month horizon and are subject to interest rate risk. Option B and D violate
the safety principle due to credit risk and market volatility, which are
prohibited for public school funds under most state statutes.
2. When calculating the "Weighted Average Maturity" (WAM) of a
school district's investment portfolio, a lower WAM generally
indicates:
A) Higher yield potential but greater interest rate risk.
B) Lower yield potential but reduced exposure to interest rate fluctuations.
, C) Higher credit risk exposure.
D) A violation of the district's arbitrage rebate requirements.
Correct Answer: B Rationale: Weighted Average Maturity measures the
average time until the investments in a portfolio mature. A lower WAM
means the portfolio's securities will mature sooner, reducing the portfolio's
sensitivity to changes in interest rates (i.e., less interest rate risk).
However, shorter maturities typically offer lower yields compared to
longer-term securities. Option A is the opposite. Option C is unrelated to
maturity. Option D refers to federal tax compliance, not WAM.
3. Under updated GASB (Governmental Accounting Standards Board)
standards effective for fiscal years beginning after June 15, 2025,
which of the following is a NEW requirement for school district
investment disclosures?
A) Disclosure of the average credit rating of all investments.
B) Disclosure of investments measured at fair value, categorized into a
three-level hierarchy based on valuation inputs.
C) Disclosure of the names of all individual brokers used in the prior year.
D) Disclosure of the district's internal investment committee meeting
minutes.
Correct Answer: B Rationale: GASB Statement No. 72 (and subsequent
updates) requires fair value measurement and disclosure using a hierarchy
(Level 1, 2, and 3 inputs) to increase transparency about how investment
values are determined. While credit ratings are important (Option A), they
are not a new requirement under the latest update. Options C and D are not
standard GASB disclosure requirements.
SECTION II: DEBT MANAGEMENT & BOND ISSUANCE 4. A school
district is preparing to issue general obligation bonds to fund a new high
school. The district's financial advisor recommends a "competitive sale"
