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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.
Choose wisely. There is only one correct answer.
Insurance. The insurance guarantees that investors receive interest and principal even if the bond issuer defaults.
2.
The lower a bond issuer's credit rating, the lower its bond coupon rate.
Choose wisely. There is only one correct answer.
False. The lower the credit rating, the higher the interest rate; this is how issuers with low credit ratings attract investors.
3.
The bonds in municipal bond funds are issued by the federal government.
Choose wisely. There is only one correct answer.
False. States and smaller units of government issue them.
4.
Municipal bond funds contain more general obligation bonds than revenue bonds.
Choose wisely. There is only one correct answer.
False. Generally, they contain more revenue bonds, since revenue bonds are much more common.
5.
Which of the following does not affect a municipal bond fund's coupon rate?
Choose wisely. There is only one correct answer.
Inflation. Inflation affects the purchasing power of returns, but only after they have been earned.