CPFO Debt Management UPDATED
ACTUAL Exam Questions and CORRECT
Answers
1.1.1 If it is not permissible to enter into swap transactions related to an entity's debt, where
would that be stated? - CORRECT ANSWER - Debt Policy
1.1.1 What should be included in an entity's debt policy? - CORRECT ANSWER - Debt
issuance process, managing the debt portfolio, guidelines for structuring
A downward sloping yield curve CANNOT be consistent with? - CORRECT ANSWER -
Investors anticipate inflation will be lower in the future.
1.1.2 Which is true about LIBOR? - CORRECT ANSWER - LIBOR can not be referenced
in new and needs to be phased out of existing financing contracts.
1.2.1 Do all governments have the same debt capacity? - CORRECT ANSWER - No, each
government determines for themselves the appropriate level of debt capacity consistent with state
law.
2.1.1 What is the most important attribute of a GO bond? - CORRECT ANSWER -
typically is backed by the full faith and credit of the government and its taxing authority.
2.1.2 All associated with revenue bond transaction? - CORRECT ANSWER - debt service
reserve requirement, debt service coverage test, trust indenture
2.1.3 TANs, RANs, TRANs, BANs, and GANs are all types of: - CORRECT ANSWER -
short term municipal note obligations
, 2.1.4 What determines if an entity can enter into a bank loan? - CORRECT ANSWER -
state law and you have discussed the option with your municipal advisor and/or others on your
financing team and determined it is an optimal financing for your entity.
2.1.5 Which one of these responsibilities do not apply to taxable debt? - CORRECT
ANSWER - arbitrage tracking
2.1.6 Which of the following is a clear benefit of a negotiated sale bond offering in contrast to a
competitive sale bond offering? - CORRECT ANSWER - Ability to target specific kinds
of investors
2.1.6 In which circumstance would an issuer be most likely to use a competitive sale? -
CORRECT ANSWER - Issuer plans to sell bonds that are well understood by the investor
community.
2.1.7 In comparison to similar non-callable securities, callable securities have: - CORRECT
ANSWER - Higher required and expected yields than non-callable securities
2.1.7 The ability to call bonds away from investors is of particular value to the issuer when: -
CORRECT ANSWER - interest rates have declined significantly below the coupon interest
rates on outstanding bonds.
2.1.7 Use of variable debt for financing has the following features: - CORRECT
ANSWER - interest expenses that rise and fall with interest revenues, useful to finance
projects with high likelihood of prepayment, requires greater financial management skill to
implement.
2.1.7 Considered a derivative product - CORRECT ANSWER - interest rate swap, futures
contract, option contract
2.1.7 For a particular bond issue with a level debt service schedule, - CORRECT
ANSWER - Principal balance decreases slowly early in the repayment, accelerating over
time.
ACTUAL Exam Questions and CORRECT
Answers
1.1.1 If it is not permissible to enter into swap transactions related to an entity's debt, where
would that be stated? - CORRECT ANSWER - Debt Policy
1.1.1 What should be included in an entity's debt policy? - CORRECT ANSWER - Debt
issuance process, managing the debt portfolio, guidelines for structuring
A downward sloping yield curve CANNOT be consistent with? - CORRECT ANSWER -
Investors anticipate inflation will be lower in the future.
1.1.2 Which is true about LIBOR? - CORRECT ANSWER - LIBOR can not be referenced
in new and needs to be phased out of existing financing contracts.
1.2.1 Do all governments have the same debt capacity? - CORRECT ANSWER - No, each
government determines for themselves the appropriate level of debt capacity consistent with state
law.
2.1.1 What is the most important attribute of a GO bond? - CORRECT ANSWER -
typically is backed by the full faith and credit of the government and its taxing authority.
2.1.2 All associated with revenue bond transaction? - CORRECT ANSWER - debt service
reserve requirement, debt service coverage test, trust indenture
2.1.3 TANs, RANs, TRANs, BANs, and GANs are all types of: - CORRECT ANSWER -
short term municipal note obligations
, 2.1.4 What determines if an entity can enter into a bank loan? - CORRECT ANSWER -
state law and you have discussed the option with your municipal advisor and/or others on your
financing team and determined it is an optimal financing for your entity.
2.1.5 Which one of these responsibilities do not apply to taxable debt? - CORRECT
ANSWER - arbitrage tracking
2.1.6 Which of the following is a clear benefit of a negotiated sale bond offering in contrast to a
competitive sale bond offering? - CORRECT ANSWER - Ability to target specific kinds
of investors
2.1.6 In which circumstance would an issuer be most likely to use a competitive sale? -
CORRECT ANSWER - Issuer plans to sell bonds that are well understood by the investor
community.
2.1.7 In comparison to similar non-callable securities, callable securities have: - CORRECT
ANSWER - Higher required and expected yields than non-callable securities
2.1.7 The ability to call bonds away from investors is of particular value to the issuer when: -
CORRECT ANSWER - interest rates have declined significantly below the coupon interest
rates on outstanding bonds.
2.1.7 Use of variable debt for financing has the following features: - CORRECT
ANSWER - interest expenses that rise and fall with interest revenues, useful to finance
projects with high likelihood of prepayment, requires greater financial management skill to
implement.
2.1.7 Considered a derivative product - CORRECT ANSWER - interest rate swap, futures
contract, option contract
2.1.7 For a particular bond issue with a level debt service schedule, - CORRECT
ANSWER - Principal balance decreases slowly early in the repayment, accelerating over
time.
