Chapter 3 Practice Questions
1.Which of the following would you be least interested in looking at to analyze a revenue bond?
A.Protective covenants
B.Flow of funds
C.Net overall debt per capita
D.Feasibility study
2.A rate covenant requires an issuer to:
A.Maintain a specified interest rate on its debt issues
B.Set rates and fees high enough to safely cover operations and debt service
C.Set aside a portion of net revenue into an escrow account
D.Avoid issuing any new debt with a higher interest rate than the rate on the current issue
3.An additional bonds covenant will appear on a bond issue:
I.With an open-end indenture
II.With a closed-end indenture
III.For a general obligation bond
IV.For a revenue bond
A.I and III
B.I and IV
C.II and III
D.II and IV
4.Which of the following are you not likely to find in the financial section of the CAFR?
A.Statement of activities
B.MD&A
C.Independent auditor’s report
D.Information about financial trends
5.Goodville wants to gather information for the pension plan portion of its CAFR. Which of the following equations best describes how to make calculations using net pension obligations?
A.Plan net position – total pension liability = net pension liability
B.Plan net position + net pension liability = total pension liability
C.Plan net position + total pension liability = net pension liability
D.Total pension liability – plan net position = net pension liability
6.Where are you most likely to find a list of protective covenants for a municipal bond?
A.Bond resolution
B.Flow of funds statement
C.Bond indenture
D.Feasibility study
7.The flow of funds for municipal revenue bonds refers to the order of priority in which expenses are paid. If debt service is paid first, the flow of funds is referred to as a:
A.Gross revenue pledge
B.Debt ser