Bond Point
1 bond point = $10
Municipal Bond
Bonds issued by state and local government entities such as cities, counties, school districts, authorities (transit, etc), and the state.
Flows of funds - Order of payment for a Net Revenue Pledge
1. Operation and maintenance fund 2. Bond service account for principal and interest 3. Debt service reserve fund and/or sinking fund 4. Reserve maintenance fund 5. Surplus fund or general fund of the municipality
Revenue Bonds
Bonds for which the payment of bond interest and principal depends on specific identified sources of revenues such as user charges, lease payments, licenses fees, or "special" taxes.
How are General Obligation bonds secured?
General Obligation bonds are secured by taxes collected by the municipality. They are not secured by revenues from revenue-generating facilities (these would be revenue bonds).
During periods of inflation, you would buy short term bonds
Double Barreled Bonds
Revenue bonds which are also backed by the full faith and credit of a municipality.
Premium bond
The bond's market price is above par value.
Flows of funds - Order of payment for a Gross Revenue Pledge
1. Bond service account for principal and interest 2. Operation and maintenance fund 3. Debt service reserve fund and/or sinking fund 4. Reserve maintenance fund 5. Surplus fund or general fund of the municipality
During periods of deflation, you would buy long term bonds
Long term bonds react the greatest to changes in interest rates.
Zero coupon bonds
sold at a deep discount and pay no interest while the bonds are outstanding.
Sinking Fund
Ensures that money is set aside for the redemption of bond principal at maturity when required
Short term bonds react the quickest to changes in interest rates.
Interest on Municipal Bonds
Municipal bonds pay interest semi-annually. Interest from munis is exempt from federal income tax and exempt from state and local taxes in the state of issuance. Outside of the state of issuance, interest may be subject to state and local income taxes.
Legal Opinion
A statement from a reputable independent law firm hired by the issuer pertaining to the tax-exempt status of municipal bonds.
A discount bond
The bond's market price is below par value.
If interest rates go DOWN, prices on bonds go UP.
Par Value of a Bond
$1,000
Zero Coupon Bonds
Bonds sold at a deep discount which mature at face value.
Refunding Bonds
Bonds issued by a municipality to pay off existing bonds.
Bonds
A debt security - investor becomes a creditor who receives interest payments for lending capital.
If interest rates go UP, prices on bonds go DOWN
Term Bonds
Bonds that are all issued with the same maturity date.
Coupon Rate/Nominal Yield
Fixed rate of interest paid to investors.
Serial Bonds
Bonds issued with staggered maturity dates.
General Obligation Bonds (GOs)
Bonds that are a general obligation of the issuing municipality (state, country, city, school district, etc.).
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