Joana
Which of the following components of the ISDA Master Agreement addresses collateralization requirements?
A. Credit support schedule
B. Credit support annex
C. Confirmation
D. Schedule
B. Credit support annex
Which of the following is typically the most important objective of a municipality’s investment program?
A. Liquidity
B. Safety
C. Return
D. Appreciation
B. Safety
Counterparty and basis risk are risks that are associated with
A. market access.
B. investment returns.
C. arbitrage rebates.
D. derivative investments.
D. derivative investments.
How many days is a refunding considered current?
A. 90 days
B. 30 days
C. 45 days
A. 90 days
If a municipality lowered the discount rate it used to calculate its pension liabilities:
A. Its pension liabilities would increase
B. This would lead to more uncertainty for bondholders
C. Its pension liabilities would increase
D. Its pension liabilities would not be affected.
A. Its pension liabilities would increase
A municipal issuer that has fixed rate debt outstanding would most likely use which of the following swaps to benefit from a drop in interest rates?
A. Interest rate cap
B. Pay-fixed interest rate swap
C. Basis Swap
D. Pay-floating interest rate swap
D. Pay-floating interest rate swap
A type of call that requires the issuer to make a lump sum payment to bondholders equal to the net present value of future value of future interest payments if known as a(n)
A. Extraordinary call
B. Mandatory call
C. Make whole call
D. Optional call
C. Make whole call
A municipality issues new bonds to call high interest bonds at the earliest possible call date. The outstanding bond issue is considered...
A. refinanced
B. currently refunded
C. defeased
D. advance refunded
D. advance refunded
What is the shortest amount of time for a GIC?
A. 1 month
B. 6 months
C. 2 weeks
D. 1 week
B. 6 months
All of the following would be signs of a deteriorating credit situation, EXCEPT:
A. The insolvency of the largest local employer
B. An increase in unfunded pension liabilities
C. A dramatic increase in the amount of credit obligations outstanding
D. An increase in assessed valuations
D. An increase in assessed valuations
Legal defeasance of a municipal bond issue occurs when the escrow account holds sufficient quantities of either U.S. Treasuries or:
A. AAA-rated municipal bonds.
B. U.S. Government Agency Securities.
C. State and Local Government Series securities.
D. Any investment-grade fixed income securities
C. State and Local Government Series securities.
All of the following are true about bond call options EXCEPT
A. They decline in value as maturity approaches
B. The are used by the issuer in times of declining interest rates
C. They can be used by the issuer to refund outstanding bonds
D. They make bonds more marketable to investors
D. They make bonds more marketable to investors
At the state level, the authority in charge of investment policy is the
A. controller
B. state treasurer
C. superintendent of finance
D. lieutenant Governor
B. state treasurer
What is the purpose of a sinking fund?
A. Enhances the safety and liquidity of an issue
B. Call option
C. To get a better credit rating
A. Enhances the safety and liquidity of an issue
An issuer is concerned that the rate it pays on its variable-rate debt will not match the floating interest rate on its swap agreement. This type of risk is referred to as:
A. Termination Risk
B. Counterparty risk
C. Basis Risk
D. Interest-rate risk
C. Basis Risk
In an advance refunding, which two of the following statements are true?
I. A maximum of 3 years of accrued interest can be financed
II. A maximum of 5 years of accrued interest can be financed
III. Proceeds for financing interest are called capitalized interest
IV. Proceeds for financing interest are called defeased interest
A. II and IV
B. II and III
C. I and IV
D. I and III
D. I and III
Which of the following securities is the least likely investment choice for a municipality’s investment of public funds?
A. AA-rated corporate bond with 30 years to maturity
B. A-rated commercial paper with 270 days to maturity
C. Five-year Treasury note
D. Negotiable CD with two years to maturity
A. AA-rated corporate bond with 30 years to maturity
A type of government security that is purchased by municipal issuers for investment of proceeds from bond refundings is a
A. SLG
B. Series EE
C. CAB
D. VRDO
A. SLG
What are the three primary objectives of Municipal Investment Programs?
A. Safety, Liquidity, Return
B. Diversification, Liquidity, Return
C. Safety, Return, Timing
A. Safety, Liquidity, Return
Which of the following actions would be MOST suitable for an issuer with fixed-rate debt that believes interest rates will rise considerably in the near future?
A. Refund all outstanding debt
B. Purchase a payer swaption
C. Enter a vanilla swap as receiver
D. Take no immediate action
D. Take no immediate action
Which two of the following are the key risks associated with the use of plain vanilla swaps in municipal finance?
I. Counterparty
II. Credit risk
III. Default Risk
IV. Interest rate risk
A. I and IV
B. I and II
C. II and IV
D. II and III
A. I and IV
Which of the following is true about a net revenue pledge?
I. Operating and maintenance costs are paid before debt service
II. Debt service is paid before operating and maintenance costs
III. It is more common than a gross revenue pledge
IV. It is less common than a gross revenue pledge
A. I & III
B. I & IV
C. II & III
D. II & IV
A. I & III
A municipal issuer that has floating rate debt outstanding would most likely use which of the following swaps to hedge against rising interest rates?
A. Fixed-for-fixed interest rate swap
B. Pay-floating interest rate swap
C. Pay-fixed interest rate swap
D. Interest rate floor
C. Pay-fixed interest rate swap
What is the future value savings equation?
A. FVS = Old net debt service – New net debt service costs
B. Bond Call – Interest saved
C. Redemption price – Callable price
A. FVS = Old net debt service – New net debt service costs
When considering the credit strength of a municipal issuer, which TWO of the following choices are the MOST important?
I. The condition of the local economy
II. The current financial status of the U.S economy
III. Money supply figures
IV. The general capability of the fiscal officers of the municipality
A. I and IV
B. II and III
C. II and IV
D. I and III
A. I and IV