GMAT Question of the Day

January 28, 2014



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Today's Practice GMAT Question:

City Council: Cities may issue municipal bonds to fund public projects. Because the interest paid to the bond holder is tax-exempt, municipal bonds are an attractive investment. So, to pay for the five state-of-the-art school buildings needed to accommodate our growing student population, Northopolis should issue a ten-year, $200 million bond, thereby paying for the buildings with revenues from an expanding tax base.
Which of the following, if true, casts the most serious doubt on the likelihood that the bond issue recommended above will have the result that is claimed?
(A) Most Northopolis citizens would be reluctant to support a tax increase to pay for new school buildings.
(B) Because municipal bond interest is tax-exempt, bond issues can severely affect a city's tax revenues for the life of the bond, despite the short-term benefits.
(C) Many popular investments are created by pooling state and municipal bonds to create tax-exempt index funds.
(D) Estimates of the cost of five new school buildings vary from well below $200 million to well above $200 million.
(E) A significant percentage of municipal bonds issued by cities such as Northopolis are purchased by investors from other cities who aim to diversify their bond portfolios.


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Need more work in this area? In Total GMAT Verbal, there is an entire chapter, including practice problems, that covers Weaken questions.

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About the author: Jeff Sackmann has written many GMAT preparation books, including the popular Total GMAT Math, Total GMAT Verbal, and GMAT 111. He has also created explanations for problems in The Official Guide, as well as 1,800 practice GMAT math questions.

Total GMAT Verbal

The comprehensive guide to the GMAT Verbal section. Recognize, dissect, and master every question type you'll face on the test. Everything you need, all in one place, including 100+ realistic practice questions.
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