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Funds 309: Municipal Bond Funds

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1.
Municipal bond funds that carry _______ on their bonds guarantee payments of interest and principal.
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Insurance. The insurance guarantees that investors receive interest and principal even if the bond issuer defaults.
2.
The collateral for revenue bonds comes from the projects that they fund.
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True. The tolls, rents, etc. serve as collateral in the event of default.
3.
Which of the following does not affect a municipal bond fund's coupon rate?
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Inflation. Inflation affects the purchasing power of returns, but only after they have been earned.
4.
The bonds in municipal bond funds are issued by the federal government.
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False. States and smaller units of government issue them.
5.
The lower a bond issuer's credit rating, the lower its bond coupon rate.
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False. The lower the credit rating, the higher the interest rate; this is how issuers with low credit ratings attract investors.