FAQ: When Analyzing The Revenue Bonds Of A Municipality, Which Would Hold The Least Significance?

Which of the following factors would be least useful when analyzing the credit risk of an issuer of revenue bonds?

Which of the following factors would be LEAST useful when analyzing the credit risk of an issuer of revenue bonds? Current interest rates are factors that will affect all bond issuers and would be least useful when analyzing a specific issuer of revenue bonds.

Which of the following projects would least likely be financed by revenue bonds?

Which of the following project would LEAST likely be financed by revenue bonds? Explanation: Construction of a new high school will not generate any revenue to pay off the bond.

Which of the following is a bond issued by a municipality in which the revenue?

An airport revenue bond is a type of municipal bond issued by a municipality or airport authority that uses the revenues of the airport facility to back the bond. In some cases, the airport revenue bond is a type of public-purpose bond.

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What type of bonds do municipalities issue?

There are two major types of municipal bonds: “general obligation bonds” and Investor Assistance (800) 732-0330 www.investor.gov Page 2 “revenue bonds.” Because these types come in many varieties, you should look beyond the short-hand label when deciding whether to purchase. before making an investment decision.

Can you lose money on municipal bonds?

If you are investing for income, either municipal bonds or money market funds will pay you interest. Just know that bonds can lose value and money market funds most likely won’t. Note also that since municipal bonds are income-tax free, you are actually making more than the interest rate would indicate.

Is BBB a junk bond?

Bonds with a rating of BBB- (on the Standard & Poor’s and Fitch scale) or Baa3 (on Moody’s) or better are considered “investment-grade.” Bonds with lower ratings are considered “speculative” and often referred to as ” high-yield ” or “junk” bonds.

How do municipalities pay back bonds?

The interest rate of most municipal bonds is paid at a fixed rate. When interest rates fall, newly issued bonds will pay a lower yield than existing issues, which makes the older bonds more attractive. Investors who want the higher yield may be willing to pay more to get it.

Are GO bonds self supporting?

GO bonds are not self-supporting because municipalities issue them to build or support projects that don’t bring in enough (or any) money to help pay off the bonds. They’re backed by the full faith and credit of the municipality.

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What will not affect the marketability of a corporate bond?

The bond denominations have no effect on marketability. Income bonds only pay interest if the corporation earns enough “income” to make that interest payment. So payment of interest is not assured. In addition, if the issuer defaults (which could happen), then the principal will not be repaid either.

Are muni bonds tax-exempt?

Municipal bonds issued by the state are free from federal taxes and are often free from taxes from the state that issued the bond. Munis are often free from state taxes if the bond issuer is not in the purchaser’s state of residence.

What will back a municipal revenue bond quizlet?

What will back a municipal revenue bond? The best answer is C. A revenue bond is defined as a debt where payment of interest and principal is derived from a source other than ad valorem taxes. Thus, revenue bonds can be paid off by lease rental fees, user fees, and special taxes (such as excise taxes).

What is general obligation and revenue bonds?

General obligation, or GO, bonds are backed by the general revenue of the issuing municipality, while revenue bonds are supported by a specific revenue source, such as income from a toll road, hospital, or higher-education system.

Are municipal bonds a good investment in 2020?

Investors who are interested in preserving capital and generating tax-free income might find that municipal bonds are a good investment, says Stuart Michelson, a finance professor at Stetson University. “Muni bonds tend to be lower risk than other varieties of bonds,” he says.

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How much do muni bonds pay?

You have no debt, own your home outright, and have built up $500,000 in savings over a long work career. You have a choice between investing in general corporate bonds or tax-free municipal bonds. The corporate bonds yield 7%, and the tax-free municipal bonds yield 5%.

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