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Bonds 210: Municipal Bond Insurance

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1.
Insured municipal bonds are not subject to interest rate risk.
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False. Insurance does not protect municipal bonds from interest rate risk.
2.
If a municipal bond covered by bond insurance defaults, the insurance company pays the bond's interest and principal payments to investors.
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True. That is how the insurance company fulfills its end of the bargain.
3.
Insured bonds have higher credit ratings than non-insured bonds.
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True. The insurance makes them look safer in the eyes of bond raters.
4.
The largest issuer of municipal bond insurance is _______.
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Assured Guaranty. Assured Guaranty dominates the municipal bond insurance market at present.
5.
The process of assessing the risk of a bond is called _______.
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Underwriting. The process is necessary before a bond can be insured.