Income Beginner: Introduction to Municipal Bonds

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1.
Municipal bonds are usually issued in _______ denominations or multiples thereof.
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$5,000. In most cases, it is $5,000.
2.
Anyone with a municipal bond can get insurance for it.
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False. An individual needs to have $50,000 or more in muni bonds to get insurance.
3.
Why do revenue bonds pay more interest than general obligation bonds?
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They involve more risk. There is the danger that the projects they finance may fail to bring in sufficient revenue.
4.
General obligation bonds finance projects that produce revenue (tolls, rents, etc.).
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False. General obligation bonds finance non-revenue-producing projects, such as public roads.
5.
What does taxable equivalent yield tell you?
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How much you'd have to earn on a taxable bond to equal what you are earning on a municipal bond. You can use the formula to figure out whether to buy a municipal or a taxable bond.