Income Beginner: Introduction to Municipal Bonds

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1.
All the earnings on a municipal bond are tax-free at the federal level.
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False. The capital gains on the sale of a municipal bond are taxable.
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 are municipal bonds sold to the public?
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To raise money to finance operations or projects. Like all forms of government bonds, municipals pay for these expenditures.
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.
In addition to receiving income from municipal projects, some revenue bonds may be secured by _______.
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Private endowments. Individual or corporate investors may donate funds to help pay off a revenue bond issue.