When Bonds Are Sold at a Premium for a Capital

question 18

Multiple Choice

When bonds are sold at a premium for a capital project, the premium amount generally:

• A) Increases the cash available to the capital projects fund.
• B) Is transferred to the debt service fund.
• C) Is applied against the principal balance by the fiduciary agent.
• D) Is recorded in a fiduciary fund since it does not belong to the capital projects fund.

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Definitions:

Guaranteed Rate

A promised or assured rate of return on an investment or loan.

Special Account

An account created for a specific, often non-routine, purpose, which may involve unique transactions or conditions.

Withdraw

The act of removing funds from a bank account or the action of retracting from a position or commitment.

Present Value

The present value of a future amount of money or series of cash flows, based on a certain return rate.