Municipal Debt

Question 1

Municipal tax status

Answer 1

Exempt from federal taxes, subject to state and local unless purchaser is from the same state

Question 2

What is millage?

Answer 2

Way to assess property tax; one mill = .001%; same as $1 for every $1000 in value

Question 3

CAB

Answer 3

Capital Appreciation Bond - zero coupon bond that allows for more debt limit since the principal is considered the discounted amount

Question 4

COP

Answer 4

Certificate of Participation - security that pledges revenue of a project to pay interest. Not a GO bond

Question 5

IDB

Answer 5

Industrial development bond

Question 6

BAB

Answer 6

Build America Bonds; Gain a 35% interest rate credit from federal govt; only usable for infrastructure improvments

Question 7

BAN

Answer 7

Bond anticipation Note - issued to start capital projects, paid off with a later long term bond issue

Question 8

CLN

Answer 8

Construction Loan Notes - used for housing projects

Question 9

TAN

Answer 9

Tax Anticipation Note

Question 10

RAN

Answer 10

Revenue anticipation note - anticipating future revenue other than ad valorem taxes, such as construction grants

Question 11

TRAN

Answer 11

Tax and Revenue Anticipation Note

Question 12

GAN

Answer 12

Grant Anticipation Note

Question 13

ETM

Answer 13

Escrowed to maturity; way to open up more of debt limit by placing government securities in escrow to cover payments of outstanding debt

Question 14

Equivalent Taxable Yield

Answer 14

Tax Free Yield/(100%-Tax bracket)

Question 15

Equivalent Tax-Free Yield

Answer 15

Taxable Yield * (100%-Tax bracket)

Question 16

Firm Quote

Answer 16

Price a dealer will honor while selling

Question 17

Nominal Quote

Answer 17

An idea of the price, but not an actual price

Question 18

Municipal Workable

Answer 18

Likely price at which a deal will buy bonds, but not a firm big

Question 19

What requirements are there for listing bonds in Bloomberg?

Answer 19

Must be “bona fide” - dealer must have been willing to sell securities at the prices the time the offer was made. Not required to own the actual securities

Question 20

EMMA and Bloomberg vs Munifacts and Daily Bond Buyer

Answer 20

EMMA and Bloomberg cover secondary market; Munifacts and Daily Bond Buyer cover primary

Question 21

Optional redemption

Answer 21

Issuer has the right to call bonds after a certain date

Question 22

Mandatory redemption

Answer 22

Issuer required to call bonds on a schedule

Question 23

Extraordinary optional redemption

Answer 23

Issuer can call bonds if an unusual event occurs; example would be mortgages being repaid on a revenue bond

Question 24

Extraordinary mandatory redemption

Answer 24

Issuer must call bonds if unusual event happens; example: project is canceled; also known as a catastrophe call