Income Beginner: Introduction to Municipal Bonds

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1.
Insured bonds pay interest rates that are _______ those of non-insured bonds.
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Lower than. The insurance makes them safer in the eyes of investors, so issuers can offer lower interest rates.
2.
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.
3.
Municipal bonds are usually issued in _______ denominations or multiples thereof.
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$5,000. In most cases, it is $5,000.
4.
What is the security behind general obligation bonds?
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The creditworthiness of the issuer. There is no monetary backing or other collateral.
5.
What does taxable equivalent yield tell you?
Choose wisely. There is only one correct answer.
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.