Under what condition can project funds earn interest without yield restrictions for a temporary period?

The condition under which project funds can earn interest without yield restrictions for a temporary period is when 85% of the sale and investment proceeds are spent. This rule is significant in public finance and debt management, particularly regarding tax-exempt bonds.

In essence, when a project has substantially progressed to the point where 85% of proceeds have been utilized, it signals that the funds are actively being used toward their intended purpose. As a result, the regulatory environment allows for more flexibility in the investment of the remaining funds, meaning that restrictions on yield, which are often imposed to ensure compliance with federal tax laws, can be lifted temporarily.

This provision is beneficial as it encourages the efficient use of project funds, allowing entities to optimize returns on surplus cash during the interval before full expenditure. The specific percentage is also designed to ensure that a substantial majority of the funds are indeed contributing to the project, thus adhering to the underlying purpose of the financing.

Other conditions, such as those proposed in the other options, do not align with established regulations governing the management of project funds and their investment strategies.