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A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, but not always, exempt from federal and state income taxation.
The revenue from that project or service pays for the bond. The interest earned on municipal bonds is exempt from federal income tax (and in some cases, state and local tax as well), making them ...
Municipal bond taxes. Municipal bonds issued by local or state governments generally offer interest income that is exempt from federal taxes. Moreover, if you live in the state where the bond is ...
An auction rate security (ARS) typically refers to a debt instrument (corporate or municipal bonds) with a long-term nominal maturity for which the interest rate is regularly reset through a Dutch auction. Since February 2008, most such auctions have failed, and the auction market has been largely frozen.
That perception could thus potentially allow a local government to borrow at a lower interest rate, saving its taxpayers' money over the life of the bonds. Despite that advantage, many states, such as California under Proposition 13 , do not allow local governments to issue unlimited-tax general obligation debt without a public vote .
In other words, the muni pays the taxable equivalent of a bond offering 4.28 percent – the threshold where you would be indifferent to the muni over the regular bond.
Interest rate changes can affect the value of a bond. If the interest rates fall, then the bond prices rise and if the interest rates rise, bond prices fall. When interest rates rise, bonds are more attractive because investors can earn higher coupon rate, thereby holding period risk may occur. Interest rate and bond price have negative ...
Tax-free municipal bonds are not just a source of investment but also a significant contributor to public projects such as roads, schools and hospitals. These debt instruments are issued by local ...
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