2.13 Municipal Bonds Flashcards
Municipal Bonds
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
CUSIP number
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
What is a key feature of municipal bonds?
Interest income is exempt from federal income taxes
Municipal bonds are good for who?
Investors in higher tax brackets
Municipal bonds have lower yields than __________ BUT higher yields than __________
Corporate
Treasury
Municipal Bonds are less risky than?
Corporate Bonds
Municipal bonds are usually issued in denominations of?
$5000
General obligation Bonds
(GO) Bonds
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
Revenue Bonds
Bonds that finance projects in which principal and interest payments to the bondholder are paid from the revenue generated by those projects
Which one is riskier?
GO Bond
Or
Revenue Bond
GO Bond
How are municipal bonds good for investors?
The income is exempt at the federal level
Which would help investors in high tax brackets
Variable rate Securities
Bonds that are long-term with interest rates that are reset on a short term basis
Municipal notes or anticipation notes
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
Municipal notes are called anticipation notes because?
They are issued in anticipation of an expected source of income. Anticipations notes allow a project to get underway before funding has been received
Tax anticipation notes (TANs)
Issued to finance a project current operations in anticipation of future tax receipts
Revenue anticipation notes (RANs)
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.
Tax and revenue anticipations notes (TRANS)
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
Tax exempt commercial paper
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
