Chapter 3 Practice Questions
1. The owner of a house with a market value of $450,000 and an assessed value of $300,000, and with an ad valorem tax of 4 mills would pay a property tax of:
A. $1,800
B. $1,200
C. $12,000
D. $18,000
2. All of the following bonds would be backed by ad valorem taxes except:
A. A bond issued by the Philadelphia Water Department
B. A bond issued by Howard County
C. A bond issued by Western School District
D. A bond issued by the City of Cincinnati
3. Which of the following are ultimately backed by the full faith and credit of the issuer?
I. Moral obligation bonds
II. General obligation bonds
III. Double-barreled bonds
IV. Lease revenue bonds
A. I and II
B. III and IV
C. II and III
D. II and IV
4. Local government investment pools may have as participants:
A. Commercial institutional investors
B. Government entities
C. Individual investors
D. Government employees
5. Which criteria would qualify an IDR bond for federal tax exemption?
A. It must be secured with public funds.
B. It can only be issued to construct new facilities.
C. It is used for a specific project that has a public use.
D. It exceeds $10 million.
6. Which of the following municipal bonds are always tax-exempt?
A. Private activity bonds
B. BABs
C. Public purpose bonds
D. AMT bonds
7. A Build America Bond may:
I. Provide a 35% subsidy on the interest as a tax deduction
II. Reimburse the issuer for 35% of the interest paid to investors
III. Provide a 35% subsidy on the interest as a tax credit
IV. Provide a 35% subsidy on the interest as an additional interest payment
A. I or II
B. I or IV
C. II or III
D. III or IV
8. The town of Sharpsville plans to issue a long-term bond for a capital project, but is still in the process of working out the final costs. Since it needs to begin work as soon as possible, whi