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Funds 309: Municipal Bond Funds

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1.
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.
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.
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.
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 _______.
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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.