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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.
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.
3.
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.
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 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.