Series 50: Arbitrage Rules

Materially Higher Yield

General investments

1/8 of 1%

Refunding escrow

1/1,000 of 1%

Any investment of replacement proceeds

1/1,000 of 1%

Program investment (not student loan)

1.5%

Qualified student loan

2%

Tax-exempt debt obligation

No yield restriction

Temporary Periods

Expenditure test

85% of bond proceeds spent on capital projects within three years of issuance

Time test

Issuer obligation to spend at least 5% of proceeds on capital project within six months of issuance

Due diligence test

Issuer has reasonable expectation that 100% of proceeds will be spent and project will be completed

Exception for reserve fund

10% of gross proceeds of bond issue may be placed in reserve or replacement fund without yield restriction

Exception for a minor portion

Lesser of 5% or $100,000 may be invested without yield restriction