Bond Anticipation Notes, issued in anticipation of bonds, may be issued for a period not exceeding how long?

Bond Anticipation Notes, issued in anticipation of bonds, may be issued for a period not exceeding how long?

• A. 1 year
• B. 2 years
• C. 3 years
• D. 5 years

Answer: (A)

Bond Anticipation Notes are short-term financing used to bridge the period until a municipality issues long-term bonds. Because their purpose is to be repaid from the forthcoming bond proceeds and to serve as a temporary funding mechanism, their maturity is limited to a short period. The standard limit is one year, meaning BANs may be issued for not more than 12 months. Longer maturities would turn these notes into longer-term debt, which changes their purpose and debt management implications. So the period not exceeding one year is the correct and appropriate limit.

Bond Anticipation Notes are short-term financing used to bridge the period until a municipality issues long-term bonds. Because their purpose is to be repaid from the forthcoming bond proceeds and to serve as a temporary funding mechanism, their maturity is limited to a short period. The standard limit is one year, meaning BANs may be issued for not more than 12 months. Longer maturities would turn these notes into longer-term debt, which changes their purpose and debt management implications. So the period not exceeding one year is the correct and appropriate limit.