CH 9 Muni bonds

Question 1

What are the two types of muni bond structures

Answer 1

tax backed bond (General obligation)
Revenue bonds

Question 2

Tax backed bonds

Answer 2

issued by municipality entities that are securitized by tax revenue

Question 3

Revenue Bonds

Answer 3

issued for either projects or enterprise financing i.e. (toll road, parking garage). the revenue made by these is pledged to the bondholders

Question 4

Insured bonds

Answer 4

in addition to being insured by the revenue it is also backed by insurance policies

Question 5

What are the three types of commercial bank support

Answer 5

Letter of credit, irrevocable line of credit, revolving line of credit

Question 6

letter of credit

Answer 6

the bank is required to advance funds to the trustee if a default has occurred

Question 7

irrevocable line of credit

Answer 7

not a guarantee of the bond issue, it dies provide a level of security

Question 8

Types of Tax risk associated with a muni

Answer 8

risk that the federal income tax rate will be reduced.
municipal bond issued as a tax-exempt issue may eventually be declared to be taxable by the IRS.