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Funds 309: Municipal Bond Funds

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1.
Municipal bond funds contain more general obligation bonds than revenue bonds.
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False. Generally, they contain more revenue bonds, since revenue bonds are much more common.
2.
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.
3.
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.
4.
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.
5.
Municipal bond funds include all of the following except _______.
Choose wisely. There is only one correct answer.
Corporate bonds. Companies in the private sector issue corporate bonds; that is why they cannot be included in municipal bond funds.