CGFM EXAM 3 COMPLETE QUESTIONS
AND ANSWERS GRADED A+
◉ Investment Diversification - 4 Areas
** Key determinant of portfolio success **
Answer: 1) type of investment
2) sectors
3) companies
4) countries (global exposure)
◉ Prudent Expert Standard aka
Prudent Investor Rule
Answer: ** fiduciary investor must act as someone with
familiarity with matters relating to the management of money, not
just prudence.
** done solely in the interest of the participants and with no
conflict of interest.
◉ Depository Trust Company
Answer: settles trades in corporate, mortgage-backed, and
municipal securities and electronically transfer security
certificates.
,◉ Written Investment Policy
** best way to maintain fiduciary responsibility, most important
control **
Answer: should address
prudent person rule
investment objectives by investment type
guidelines for selection
required collateral
required valuation/reporting instruments
benchmarks for standards of comparison
permissible/non-permissible investments
positions and authorizations
guidelines for use of investment managers
required controls
◉ Government Credit Programs
Government = "lender of last resort", for those that would not
otherwise qualify
Answer: 1) Direct Loans: Gov --> Private Party
2) Loan Guarantees: Bank --> Private Party w/ Gov Guarantee
3) Extension of Credit
4) Delinquent Taxes --> deferral programs and payment plans
Subject to legislative authorization
, ◉ Government Loan - Program Management
Answer: Responsible for (using legislative guidance):
* choosing who is eligible
* determining amount of credit to extend
* establishing terms and conditions
* negotiating work-out arrangements with delinquent accounts
◉ Government Loan - Financial Management
Answer: Provide Program Mgmt support, including:
* budget oversight
* reporting to credit bureaus
* establish accounting records for each borrowed
* recording payments
* monitoring re-payment
* reporting on condition of the loans
* initiating collections on delinquent accounts
* dealing with uncollectable accounts
◉ Evaluating Creditworthiness - " 4 C's"
Answer: 1) Character ** most important factor **
2) Capacity - ability to meet terms of loan
3) Collateral - available in the event of default
AND ANSWERS GRADED A+
◉ Investment Diversification - 4 Areas
** Key determinant of portfolio success **
Answer: 1) type of investment
2) sectors
3) companies
4) countries (global exposure)
◉ Prudent Expert Standard aka
Prudent Investor Rule
Answer: ** fiduciary investor must act as someone with
familiarity with matters relating to the management of money, not
just prudence.
** done solely in the interest of the participants and with no
conflict of interest.
◉ Depository Trust Company
Answer: settles trades in corporate, mortgage-backed, and
municipal securities and electronically transfer security
certificates.
,◉ Written Investment Policy
** best way to maintain fiduciary responsibility, most important
control **
Answer: should address
prudent person rule
investment objectives by investment type
guidelines for selection
required collateral
required valuation/reporting instruments
benchmarks for standards of comparison
permissible/non-permissible investments
positions and authorizations
guidelines for use of investment managers
required controls
◉ Government Credit Programs
Government = "lender of last resort", for those that would not
otherwise qualify
Answer: 1) Direct Loans: Gov --> Private Party
2) Loan Guarantees: Bank --> Private Party w/ Gov Guarantee
3) Extension of Credit
4) Delinquent Taxes --> deferral programs and payment plans
Subject to legislative authorization
, ◉ Government Loan - Program Management
Answer: Responsible for (using legislative guidance):
* choosing who is eligible
* determining amount of credit to extend
* establishing terms and conditions
* negotiating work-out arrangements with delinquent accounts
◉ Government Loan - Financial Management
Answer: Provide Program Mgmt support, including:
* budget oversight
* reporting to credit bureaus
* establish accounting records for each borrowed
* recording payments
* monitoring re-payment
* reporting on condition of the loans
* initiating collections on delinquent accounts
* dealing with uncollectable accounts
◉ Evaluating Creditworthiness - " 4 C's"
Answer: 1) Character ** most important factor **
2) Capacity - ability to meet terms of loan
3) Collateral - available in the event of default
