2.13 Municipal Bonds

Question 1

Municipal Bonds

Answer 1

Generally exempt from federal government oversight

No prospectus is needed from the issuer

Exempt from registration

Instead they offer a less detail disclosure called an official statement

Question 2

CUSIP number

Answer 2

Consists of nine characters that uniquely identify an issue were and the type of security

Used to identify most securities including;

Government securities, municipal and corporate bonds, and all registered US stocks

Question 3

What is a key feature of municipal bonds?

Answer 3

Interest income is exempt from federal income taxes

Question 4

Municipal bonds are good for who?

Answer 4

Investors in higher tax brackets

Question 5

Municipal bonds have lower yields than __________ BUT higher yields than __________

Answer 5

Corporate

Treasury

Question 6

Municipal Bonds are less risky than?

Answer 6

Corporate Bonds

Question 7

Municipal bonds are usually issued in denominations of?

Answer 7

$5000

Question 8

General obligation Bonds

(GO) Bonds

Answer 8

Bonds that are issued to fund the general operation expenses of the Municipal government or to provide funds for capital improvement projects such as;

roads

parks

court houses

and schools

Question 9

Revenue Bonds

Answer 9

Bonds that finance projects in which principal and interest payments to the bondholder are paid from the revenue generated by those projects

Question 10

Which one is riskier?

GO Bond

Or

Revenue Bond

Answer 10

GO Bond

Question 11

How are municipal bonds good for investors?

Answer 11

The income is exempt at the federal level

Which would help investors in high tax brackets

Question 12

Variable rate Securities

Answer 12

Bonds that are long-term with interest rates that are reset on a short term basis

Question 13

Municipal notes or anticipation notes

Answer 13

Short term debt obligations issued in anticipation of an expected source of income.

Anticipations notes allow a project to get underway before funding has been received

Question 14

Municipal notes are called anticipation notes because?

Answer 14

They are issued in anticipation of an expected source of income. Anticipations notes allow a project to get underway before funding has been received

Question 15

Tax anticipation notes (TANs)

Answer 15

Issued to finance a project current operations in anticipation of future tax receipts

Question 16

Revenue anticipation notes (RANs)

Answer 16

Issue to finance the current operations of a project backed by revenue bond, in anticipation of fees from the completed project to repay the notes.

Question 17

Tax and revenue anticipations notes (TRANS)

Answer 17

If a government needs an influx of cash to pay expenses for various projects funded by GO and revenue bonds, it may issue (TRANs)

They are backed by future tax in revenue receipts

Question 18

Tax exempt commercial paper

Answer 18

Short term promissory note issued by states and municipalities.

Usually back by a line of credit with a bank

Maturities range between one and 270 days

Notes are issued at a discount to par