CGFO Exam Study Guide with Complete Solutions

CGFO Exam Study Guide with Complete Solutions Ad Valorem Tax - Correct Answer A direct tax based "according to value" of property. Counties and school districts and municipalities usually are, and special tax districts may be, authorized by law to levy ad valorem taxes on property other than intangible personal property. Local governmental bodies with taxing power may issue bonds or short-term certificates payable from ad valorem taxation. Advance Refunding - Correct Answer The refinancing of outstanding bonds by the issuance of a new issue of bonds prior to the date on which the outstanding bonds become due or are callable. Accordingly, for a period of time, both the issue being refunded and the refunding issue are outstanding. Bonds are "escrowed to maturity" when the proceeds of the refunding bonds are deposited in escrow for investment in federal securities in an amount sufficient to pay, when due, the principal of and interest on the issue being refunded. Bonds are considered "pre-refunded" when the refunding bond proceeds are escrowed only until the call day of the refunded issue. The Internal Revenue Code restricts the yield which may be earned on investment of the proceeds of refunding bonds. Amortization - Correct Answer The process of paying the principal amount of an issue of bonds by the periodic payments either directly to bondholders or to a sinking fund for the benefit of bondholders. Payments are usually calculated to include interest in addition to a partial payment of the original principal amount. Arbitrage - Correct Answer Generally, transactions by which securities are bought and sold in different markets at the same time for the sake of profit arising from a difference in prices in the two markets. With respect to the issuance of municipal bonds, arbitrage usually refers to the difference between the interest paid