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Bonds 208: General Obligation Bonds

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1.
Municipalities may repay bondholders prior to the maturity of the municipal bonds.
Choose wisely. There is only one correct answer.
True. Municipalities may call a bond issue in order to refinance the debt at lower interest rates.
2.
A municipality's full faith and credit includes municipal taxes, bond issues, and user fees.
Choose wisely. There is only one correct answer.
False. A municipality's full faith and credit includes taxation and borrowing, but not project revenue like user fees.
3.
Individuals who want to invest in general obligation municipal bonds will need at least $5,000 to get started.
Choose wisely. There is only one correct answer.
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.
4.
The tax status of general obligation municipal bonds makes them an undesirable investment for individuals in the higher tax brackets.
Choose wisely. There is only one correct answer.
False. The tax-free status of general obligation municipal bond interest makes these bonds desirable for those in the higher tax brackets.
5.
Most general obligation bonds are purchased directly from municipalities.
Choose wisely. There is only one correct answer.
False. Most general obligation bonds are purchased on the secondary market.