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Bonds 208: General Obligation Bonds

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1.
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.
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.
Most general obligation bonds are purchased directly from municipalities.
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False. Most general obligation bonds are purchased on the secondary market.
4.
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.
5.
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.