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Bonds 208: General Obligation Bonds

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1.
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.
2.
Individuals who want to invest in general obligation municipal bonds will need at least $5,000 to get started.
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False. By purchasing shares in a pool of bonds, such as a mutual fund or unit investment trust, it is possible to invest in general obligation bonds for less than the typical face-value price of $5,000.
3.
Which of the following is an example of an ad valorem tax?
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Property tax. This is an example of an ad valorem tax, a tax levy based on the value of property or real estate.
4.
All of the following might be funded with general obligation bonds except _______.
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A pay parking ramp. This would generate revenue from user fees and would more likely be funded with revenue bonds than GO bonds.
5.
All of the following are examples of taxes that municipalities may use to pay general obligation bondholders, except _______.
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User fees. User fees are not an example of the kind of taxes municipalities use to pay bondholders.