AGA GAFRB Exam - Topic 2 Question 23 Discussion

Actual exam question for AGA's GAFRB exam

Question #: 23
Topic #: 2

If a capital project has an estimated life of 30 years, which financing method is designed to impose the cost of the project on the generation who benefits from it?

A30-year serial bonds

B30-year term bonds, without a sinking fund

C30-year zero-coupon bonds, without a sinking fund

Dpay-as-you-go financing
Serial bonds mature in installments over the life of the bond (e.g., every year or every few years). This structure allows the cost of repaying the debt to align more closely with the periods in which the capital asset is used --- achieving intergenerational equity by spreading the cost over the same span as the asset's useful life.
Term bonds, zero-coupon bonds, and pay-as-you-go do not align costs with benefits across multiple years in the same way.
Relevant Reference:
GFOA Best Practices -- Debt Management and Capital Planning
GASB Concepts Statement No. 1 -- Interperiod Equity
MSRB Educational Materials on Bond Types
Answer : A. 30-year serial bonds

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Suggested Answer: A

by Murray at Aug 16, 2026, 10:02 AM

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Vashti

4 days ago

I practiced a similar question about bond types, and I think serial bonds were highlighted for their ability to spread costs over the project’s life.

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Merlyn

9 days ago

I’m not entirely sure, but I think pay-as-you-go financing might also relate to intergenerational equity, though it doesn’t last as long as the project.

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Clorinda

14 days ago

I remember studying that serial bonds are designed to match costs with benefits over time, which seems to fit this question.

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