For arbitrage purposes, a 3 year temporary period of unrestricted investment will be available if the bond issuer has the reasonable expectation at the time of issuance that it will enter into a binding obligation within 6 months to spend the lesser of $100,000.00 or two and a half percent of the project cost, that it will spend 85% of the proceeds within 3 years of the date of issuance and that it will proceed with the project with due diligence to completion.

For arbitrage purposes, a 3 year temporary period of unrestricted investment will be available if the bond issuer has the reasonable expectation at the time of issuance that it will enter into a binding obligation within 6 months to spend the lesser of $100,000.00 or two and a half percent of the project cost, that it will spend 85% of the proceeds within 3 years of the date of issuance and that it will proceed with the project with due diligence to completion.

• A. Not stated
• B. True
• C. Not applicable
• D. False

Answer: (B)

The thing being tested is how the temporary period rules for arbitrage on bond proceeds work. If, at the time of issuance, the issuer reasonably expects to do three things, it can have a three-year period during which investment earnings on unspent proceeds are unrestricted. First, there must be a binding obligation within six months to spend the lesser of $100,000 or 2.5% of the project cost. This shows real commitment to the project and ensures a minimum level of spend is planned upfront. Second, 85% of the proceeds must be spent within three years of issuance, which demonstrates substantial progress is being made on the project. Third, the project must proceed with due diligence to completion, confirming the plan is moving forward in a prudent, timely manner. When all these conditions are met, the issuer qualifies for the three-year temporary period of unrestricted investment, meaning investment earnings on unspent proceeds during that window are not subject to the usual arbitrage restrictions. Therefore, the statement is true, reflecting the established rule.

The thing being tested is how the temporary period rules for arbitrage on bond proceeds work. If, at the time of issuance, the issuer reasonably expects to do three things, it can have a three-year period during which investment earnings on unspent proceeds are unrestricted.

First, there must be a binding obligation within six months to spend the lesser of $100,000 or 2.5% of the project cost. This shows real commitment to the project and ensures a minimum level of spend is planned upfront. Second, 85% of the proceeds must be spent within three years of issuance, which demonstrates substantial progress is being made on the project. Third, the project must proceed with due diligence to completion, confirming the plan is moving forward in a prudent, timely manner.

When all these conditions are met, the issuer qualifies for the three-year temporary period of unrestricted investment, meaning investment earnings on unspent proceeds during that window are not subject to the usual arbitrage restrictions. Therefore, the statement is true, reflecting the established rule.