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Bonds 208: General Obligation Bonds

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1.
General obligation bonds can be effective investments for those who seek a high degree of safety from their investments.
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True. General obligation bonds are typically highly rated for their low default risk.
2.
A municipality's full faith and credit includes municipal taxes, bond issues, and user fees.
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False. A municipality's full faith and credit includes taxation and borrowing, but not project revenue like user fees.
3.
The tax status of general obligation municipal bonds makes them an undesirable investment for individuals in the higher tax brackets.
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False. The tax-free status of general obligation municipal bond interest makes these bonds desirable for those in the higher tax brackets.
4.
Municipalities may repay bondholders prior to the maturity of the municipal bonds.
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True. Municipalities may call a bond issue in order to refinance the debt at lower interest rates.
5.
All of the following are ways to make a $1,000 investment in general obligation bonds except _______.
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Brokers. Brokers typically require minimums of greater than $5,000 to purchase general obligation bonds. The other options are general obligation bond pools that provide a much lower buy-in price.