Question

Which of the following best describes a municipal bond?

A bond issued by quasi-government securities.

A bond issued by a multilateral agency like the International Monetary Fund.

A bond issued whose sources for paying interest often include the cash flows of the project the bond issue is financing or special taxes and fees established for that purpose.

A bond issued internationally within the jurisdiction of the country whose currency the bond is denominated.

A bond issued internationally, outside the jurisdiction of the country in whose currency the bond is denominated.

A bond backed by the full faith and credit of the issuer.

Answer 1

Answer-

Municipal Bond-

A municipal bond, commonly known as a muni bond, is a bond issued by a local government or territory, or one of their agencies. It is generally used to finance public projects such as roads, schools, airports and seaports, and infrastructure-related repairs.

The term municipal bond is commonly used in the United States, which has the largest market of such trade-able securities in the world. As of 2011, the municipal bond market was valued at $3.7 trillion.

Potential issuers of municipal bonds include states, cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and other governmental entities (or group of governments) at or below the state level having more than a de minimis amount of one of the three sovereign powers: the power of taxation, the power of eminent domain or the police power.

Outside the United States, many other countries in the world also issue similar bonds, sometimes called local authority bonds or other names. The key defining feature of such bonds is that they are issued by a public-use entity at a lower level of government than the sovereign. Such bonds follow similar market patterns as U.S. bonds. That said, the U.S. municipal bond market is unique for its size, liquidity, legal and tax structure and bankruptcy protection afforded by the U.S. Constitution.

Over the last decade many traditional and new market participants have begun to apply current technology solutions to the municipal market remedying many of the latent problems associated with many aspects of the municipal bond market. The emergence of products like small denomination municipal bonds, for example, is a result of new bond financing platforms. Such products also open up the muni market to middle-income buyers who otherwise couldn't afford the large, $5,000 minimum price in which bonds are typically bundled. The general idea with modern platforms is to leverage technology to make the market more responsive to investors, more financially transparent and ultimately easier for issuers and buyers. Many believe that, in doing so, more people will compete to buy muni bonds and thus the cost of issuing debt will be lower for issuers

In the above question the last option is correct since the muni bonds are two types

1) General obligation bonds

2) Revenue bonds

general obligation bonds are Principal and interest are secured by the full faith and credit of the issuer and usually supported by either the issuer's unlimited or limited taxing power. In many cases, general obligation bonds are voter-approved

A bond backed by the full faith and credit of the issuer is most municipal bond