3 Intro Munies Flashcards
Municipal Securities
who issues?
state
local
territories
taxing authorities
Municipal Securities
interest
yeild
not taxable by fed govt
yeild lower than corp or govt
Municipal Securitites
Expemption - Which Act?
Act of 1933
subject to anti fraud in Act of 1934
Doctrine of
Reciprocal Immunity
Mutual Reciprocity
level of govt can tax own interests
municipal sec can only tax on municipal level
Muni Tax
mostly exempt but subect to capital gains
tax exempt if buy bond issued in state you live in
Muni Tax
Which ones are tax free?
Public Purpose
Essential Services
Muni Tax
Which ones are taxable?
Name of tax?
Private Activity
Alternative Minimum Tax (AMT)
sports stadium, facility op by private co.
dollar bonds
price
backing
issue
term bonds quoted by price
some issures establish sinking fund
issued serially
basis
Yeild to Maturity
Types (5)
- Gereral Obligations GO’s
- Revenue Bonds
- Municipal Notes
- State & Local Govt Securitits Series SLGS
- Build America Bonds BABs
Municipal Bond
Volatility
fluctuate more than
corp. or fed govt.
Insurance covers
principal & interest
FGIC & AGC
Official Statement
important info on new issue
Munies are traded
OTC
Basis Quote
bonds priced YTM
instead of dollar priced
Capital Gains
Annual Amorization Formula
Caculate Capital Gains/Loss
Bond Price = 1200
Term = 10 years
Caculate Capital Gains/Loss
Bond Price = 1200
Term = 10 years
Sold after 6 years for 110
GO
Tax Equivalent Yield
% int corp bond would need to offer to get = yeild due to tax free status.
Tax Free - divide
Taxable - multiply
GO
Tax Equivalent Yield
Which one is better, GO or Corp?
- 30% tax bracket
- 7% GO
- 9.5% XYZ corp bond
Taxed Equivalent - divide
GO
Tax Free Equivalent Yield
What % of int on muni would be better than
- 30% tax bracket
- 9.5% XYZ corp bond
Tax Free Equilivant - mutiply
