In a bond covenant, a city agreed to create and maintain a $2 million reserve. These funds can be used
A) Only to make the final year's interest and principal payments on the bonds.
B) Only to make the interest and principal payments on the bonds in a year in which the city is unable to make them from other resources.
C) To make either the final year's interest and principal payments on the bonds or to make the payments in any year that the city is unable to make them from other resources.
D) By the city as it chooses since the funds legally belong to the city.

Question

Quizplus · Accepted Answer

Option C is correct because it combines the purposes of options A and B, allowing for the use of the reserve for the final year's payments or any year the city cannot make payments from other resources, providing a broader and more flexible use of the funds.

In a Bond Covenant, a City Agreed to Create and Maintain