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Bonds 208: General Obligation Bonds

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1.
Municipalities may repay bondholders prior to the maturity of the municipal bonds.
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True. Municipalities may call a bond issue in order to refinance the debt at lower interest rates.
2.
General obligation bonds can be effective investments for those who seek a high degree of safety from their investments.
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True. General obligation bonds are typically highly rated for their low default risk.
3.
Individuals who want to invest in general obligation municipal bonds will need at least $5,000 to get started.
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False. By purchasing shares in a pool of bonds, such as a mutual fund or unit investment trust, it is possible to invest in general obligation bonds for less than the typical face-value price of $5,000.
4.
Most general obligation bonds are purchased directly from municipalities.
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False. Most general obligation bonds are purchased on the secondary market.
5.
The principal difference between general obligation bonds and revenue bonds is that _______.
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The two are backed by different kinds of collateral. General obligation bonds are backed by full faith and credit, and revenue bonds are backed by project revenue.