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Bonds 210: Municipal Bond Insurance

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1.
Insured bonds generally have lower yields than non-insured bonds.
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True. Because of the safety feature offered by insurance, issuers can offer lower yields.
2.
The process of assessing the risk of a bond is called _______.
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Underwriting. The process is necessary before a bond can be insured.
3.
The risk that a government will be unable to repay the principal of a bond is called _______.
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Default risk. The risk that a government will be unable to repay the principal of a bond is called default risk.
4.
The largest issuer of municipal bond insurance is _______.
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MBIA. The largest issuer of municipal bond insurance is MBIA.
5.
If a municipal bond covered by bond insurance defaults, the insurance company pays the bond's interest and principal payments to investors.
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True. That is how the insurance company fulfills its end of the bargain.