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Which of the following does not affect a municipal bond fund's coupon rate?

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Inflation

Interest rates

Maturities of bonds in the fund

Credit risk

Inflation. Inflation affects the purchasing power of returns, but only after they have been earned.

A "tax-free fund" is likely to be a municipal bond mutual fund.

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True

False

True. Most tax-free funds invest in municipal bonds.

The collateral for revenue bonds comes from the projects that they fund.

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True

False

True. The tolls, rents, etc. serve as collateral in the event of default.

Municipal bond funds include all of the following except _______.

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Municipal notes

General obligation bonds

Revenue bonds

Corporate bonds

Corporate bonds. Companies in the private sector issue corporate bonds; that is why they cannot be included in municipal bond funds.

The lower a bond issuer's credit rating, the lower its bond coupon rate.

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True

False

False. The lower the credit rating, the higher the interest rate; this is how issuers with low credit ratings attract investors.

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