CGFO EXAM QUESTIONS AND CORRECT ANSWERS

CGFO EXAM QUESTIONS AND
CORRECT ANSWERS
AdA2ValoremA2TaxA2-A2Ans--
AA2directA2taxA2basedA2"accordingA2toA2value"A2ofA2property.A2CountiesA2andA2schoolA2dist
rictsA2andA2municipalitiesA2usuallyA2are,A2andA2specialA2taxA2districtsA2mayA2be,A2authoriz
edA2byA2lawA2toA2levyA2adA2valoremA2taxesA2onA2propertyA2otherA2thanA2intangibleA2person
alA2property.A2LocalA2governmentalA2bodiesA2withA2taxingA2powerA2mayA2issueA2bondsA2or
A2short-termA2certificatesA2payableA2fromA2adA2valoremA2taxation.


AdvanceA2RefundingA2-A2Ans--
TheA2refinancingA2ofA2outstandingA2bondsA2byA2theA2issuanceA2ofA2aA2newA2issueA2ofA2bo
ndsA2priorA2toA2theA2dateA2onA2whichA2theA2outstandingA2bondsA2becomeA2dueA2orA2areA2c
allable.A2Accordingly,A2forA2aA2periodA2ofA2time,A2bothA2theA2issueA2beingA2refundedA2andA
2theA2refundingA2issueA2areA2outstanding.
BondsA2areA2"escrowedA2toA2maturity"A2whenA2theA2proceedsA2ofA2theA2refundingA2bondsA
2areA2depositedA2in
escrowA2forA2investmentA2inA2federalA2securitiesA2inA2anA2amountA2sufficientA2toA2pay,A2wh
enA2due,A2theA2principal
ofA2andA2interestA2onA2theA2issueA2beingA2refunded.A2BondsA2areA2consideredA2"pre-
refunded"A2whenA2the
refundingA2bondA2proceedsA2areA2escrowedA2onlyA2untilA2theA2callA2dayA2ofA2theA2refunde
dA2issue.A2TheA2Internal
RevenueA2CodeA2restrictsA2theA2yieldA2whichA2mayA2beA2earnedA2onA2investmentA2ofA2the
A2proceedsA2of
refundingA2bonds.

AmortizationA2-A2Ans--
TheA2processA2ofA2payingA2theA2principalA2amountA2ofA2anA2issueA2ofA2bondsA2byA2theA2pe
riodicA2paymentsA2eitherA2directlyA2toA2bondholdersA2orA2toA2aA2sinkingA2fundA2forA2theA2b
enefitA2ofA2bondholders.A2PaymentsA2areA2usuallyA2calculatedA2toA2includeA2interestA2inA2
additionA2toA2aA2partialA2paymentA2ofA2theA2originalA2principalA2amount.

ArbitrageA2-A2Ans--
Generally,A2transactionsA2byA2whichA2securitiesA2areA2boughtA2andA2soldA2inA2differentA2m
arketsA2at
theA2sameA2timeA2forA2theA2sakeA2ofA2profitA2arisingA2fromA2aA2differenceA2inA2pricesA2inA2t
heA2twoA2markets.A2With
respectA2toA2theA2issuanceA2ofA2municipalA2bonds,A2arbitrageA2usuallyA2refersA2toA2theA2dif
ferenceA2betweenA2the
interestA2paidA2onA2theA2bondsA2issuedA2andA2theA2interestA2earnedA2byA2investingA2theA2b
ondA2proceedsA2inA2other
securities.A2ArbitrageA2profitsA2areA2permittedA2onA2bondA2proceedsA2forA2variousA2tempor
aryA2periodsA2after

,issuanceA2ofA2municipalA2bonds.A2InternalA2RevenueA2ServiceA2regulationsA2governA2arbit
rageA2of
municipalA2bondA2proceeds.

BalloonA2MaturityA2-A2Ans--
AA2laterA2maturityA2withinA2anA2issueA2ofA2bondsA2whichA2containsA2aA2disproportionatelyA
2largeA2percentageA2ofA2theA2principalA2amountA2ofA2theA2originalA2issue.A2ProvisionA2isA2o
ftenA2madeA2forA2paymentA2ofA2theA2balloonA2maturityA2byA2makingA2periodicA2paymentsA2
toA2aA2sinkingA2fundA2forA2the
mandatoryA2redemptionA2ofA2specifiedA2amountsA2priorA2toA2theirA2statedA2maturity.

AverageA2LifeA2orA2AverageA2MaturityA2-A2Ans--
TheA2numberA2ofA2yearsA2equalA2toA2theA2totalA2bondA2yearsA2dividedA2byA2theA2totalA2nu
mberA2ofA2bondsA2(1A2bond=$1,000A2regardlessA2ofA2actualA2denomination).A2TheA2avera
ge
maturityA2reflectsA2howA2rapidlyA2theA2principalA2ofA2anA2issueA2isA2expectedA2toA2beA2paid
A2andA2isA2importantA2to
underwritersA2inA2calculatingA2bidsA2forA2newA2issuesA2ofA2municipalA2securities.

BasisA2PointA2-A2Ans--
OneA2basisA2pointA2isA2equalA2toA21/100A2ofA2oneA2percent.A2IfA2interestA2ratesA2increaseA2
fromA28.25%A2toA28.50%,A2theA2differenceA2isA2refereedA2toA2asA2aA225A2basisA2pointA2incr
ease.

BiddingA2SyndicateA2-A2Ans--
OneA2orA2moreA2firmsA2ofA2underwritersA2thatA2actA2togetherA2toA2submitA2aA2proposalA2toA
2underwriteA2aA2bondA2issue.


BlueA2SkyA2LawsA2-A2Ans--
CommonA2termA2forA2stateA2securitiesA2law,A2whichA2varyA2fromA2stateA2toA2state.A2Gener
allyA2refersA2toA2provisionA2relatedA2toA2prohibitionsA2againstA2fraud,A2dealerA2andA2broker
A2regulations,A2andA2securitiesA2registration.


BondA2-A2Ans--
AA2wayA2ofA2borrowingA2moneyA2longA2termA2forA2capitalA2projects.A2AA2bondA2isA2aA2prom
iseA2toA2repay
moneyA2borrowedA2onA2aA2particularA2dateA2oftenA210A2orA220A2yearsA2inA2theA2future.A2M
ostA2bondsA2alsoA2involve
aA2promiseA2toA2payA2aA2specifiedA2dollarA2amountA2ofA2interestA2atA2predeterminedA2inter
vals.

BondA2Buyer,A2TheA2-A2Ans--
AA2tradeA2paperA2ofA2theA2municipalA2bondA2industryA2publishedA2inA2NewA2YorkA2CityA2ea
chA2businessA2day,A2whichA2containsA2advertisementsA2forA2offeringsA2ofA2newA2issuesA2o
fA2municipalA2bonds,A2noticesA2ofA2bondA2redemptions,A2statisticalA2analysesA2ofA2marketA

, 2activity,A2resultsA2ofA2previousA2bondA2sales,A2andA2articlesA2reactingA2toA2financialA2mar
ketsA2andA2publicA2finance.

BondA2ContractA2-A2Ans--
TheA2legalA2agreementA2betweenA2theA2issuerA2andA2theA2debtA2holder,A2whichA2definesA2
theA2securityA2andA2termsA2ofA2theA2debt.A2UsuallyA2foundA2in:A2(1)A2anyA2substantiveA2res
olution,A2ordinance,A2orA2bondA2legislationA2authorizingA2theA2debt;A2(2)A2theA2trustA2inden
tureA2(ifA2applicable);A2andA2(3)A2theA2formA2of
theA2bondA2itself.

BondA2CounselA2orA2BondA2ApprovingA2CounselA2-A2Ans--
AnA2attorneyA2(orA2firmA2ofA2attorneys)A2retainedA2byA2the
issuerA2toA2giveA2aA2legalA2optionA2thatA2theA2issuerA2isA2authorizedA2toA2issueA2proposedA
2bonds,A2theA2issuerA2has
metA2allA2legalA2requirementsA2necessaryA2forA2issuance,A2andA2interestA2inA2theA2propos
edA2bondsA2willA2be
exemptA2fromA2federalA2incomeA2taxationA2andA2,A2whereA2applicable,A2fromA2stateA2andA2
localA2taxation.
Typically,A2bondA2counselA2mayA2prepare,A2orA2reviewA2andA2adviseA2theA2issuerA2regardi
ng,A2authorizing
resolutionsA2orA2ordinances,A2trustA2indentures,A2officialA2statements,A2validationA2procee
dingsA2and
litigation.

BondA2CovenantA2-A2Ans--
AnA2agreementA2thatA2governsA2theA2useA2ofA2theA2borrowedA2moneyA2whenA2aA2govern
mentalA2agencyA2sellsA2aA2bond.A2TheA2covenantA2becomesA2aA2legallyA2enforceableA2ag
reementA2withA2theA2bondA2holders.

BondA2FiscalA2YearA2orA2BondA2YearA2-A2Ans--TheA2twelve-
monthA2accountingA2period,A2asA2establishedA2byA2theA2bondA2contract,A2usedA2inA2conne
ctionA2withA2anA2issueA2ofA2municipalA2securities.A2PrincipalA2andA2interest
paymentsA2areA2scheduledA2inA2accordanceA2withA2theA2bondA2fiscalA2year.A2TheA2bondA2f
iscalA2yearA2doesA2not
necessarilyA2coincideA2withA2theA2issuingA2agency'sA2ownA2fiscalA2year,A2andA2mayA2beA2e
stablishedA2inA2orderA2to
takeA2fullA2advantageA2ofA2theA2scheduledA2cashA2flowA2ofA2projectedA2pledgedA2revenues
.

BondA2FundA2-A2Ans--
AA2portfolioA2ofA2bondsA2administeredA2byA2aA2manager,A2whoA2offersA2sharesA2inA2suchA2
fundA2toA2investors.A2Open-
endA2bondA2fundsA2offerA2sharesA2continuouslyA2toA2theA2investingA2public,A2whileA2closed
endA2bondA2fundsA2containA2aA2limitedA2numberA2ofA2shares,A2andA2newA2investorsA2must
A2purchaseA2sharesA2fromA2previousA2investorsA2inA2suchA2funds.A2BondA2poolsA2ofA2thes
eA2typesA2areA2alsoA2knownA2asA2"ManagedA2Funds",