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Funds 309: Municipal Bond Funds

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1.
Municipal bond funds include all of the following except _______.
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Corporate bonds. Companies in the private sector issue corporate bonds; that is why they cannot be included in municipal bond funds.
2.
A "tax-free fund" is likely to be a municipal bond mutual fund.
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True. Most tax-free funds invest in municipal bonds.
3.
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.
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 earn less than corporate bond funds because their bonds are _______.
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Tax-free. Issuers of municipal bonds can afford to offer less because investors will save money on taxes.