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Municipal bond funds that carry _______ on their bonds guarantee payments of interest and principal.

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Insurance

Tax-free yields

Customer accounts

Insurance. The insurance guarantees that investors receive interest and principal even if the bond issuer defaults.

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.

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.

Municipal bond funds contain more general obligation bonds than revenue bonds.

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True

False

False. Generally, they contain more revenue bonds, since revenue bonds are much more common.

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