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300
Funds 309:
Municipal Bond Funds
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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Review your answers below to learn more.
1.
The lower a bond issuer's credit rating, the lower its bond coupon rate.
Choose wisely. There is only one correct answer.
True
False
False. The lower the credit rating, the higher the interest rate; this is how issuers with low credit ratings attract investors.
2.
The collateral for revenue bonds comes from the projects that they fund.
Choose wisely. There is only one correct answer.
True
False
True. The tolls, rents, etc. serve as collateral in the event of default.
3.
Municipal bond funds earn less than corporate bond funds because their bonds are _______.
Choose wisely. There is only one correct answer.
Insured
Tax-free
More volatile
Tax-free. Issuers of municipal bonds can afford to offer less because investors will save money on taxes.
4.
A "tax-free fund" is likely to be a municipal bond mutual fund.
Choose wisely. There is only one correct answer.
True
False
True. Most tax-free funds invest in municipal bonds.
5.
Municipal bond funds that carry _______ on their bonds guarantee payments of interest and principal.
Choose wisely. There is only one correct answer.
Insurance
Tax-free yields
Customer accounts
Insurance. The insurance guarantees that investors receive interest and principal even if the bond issuer defaults.
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DONE