| Municipal bonds and notes are issued by
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| | municipal bond and securing the bond
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| state and local governments. These
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| | investors with school or property tax
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| municipalities include:
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| | revenue is considered a General
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| States
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| | Obligation bond as well. Since taxes are
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| Counties and Cities
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| | the most secure source for money now and
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| Towns and Schools
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| | in the future, some investors prefer them
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| Municipal AuthoritiesInterest payments
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| | over most revenue issues.Revenue
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| on traditional municipal bonds are exempt
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| | BondsIssues that rely on the revenue
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| from federal tax. They are subject to
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| | producing ability of a facility or from
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| state and local tax.Tax Free YieldWhen
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| | the issuer through other means are
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| looking to purchase muni bonds, a person
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| | Revenue Bonds. There are several types of
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| should understand how tax exempt yields
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| | issuers. These would include:
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| work. The higher the tax bracket, the
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| | Transportation - Bridges, Tolls, and
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| higher the yield. If an investor is
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| | Airports would be good examples
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| considering buying a 6% municipal bond at
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| | Health care - City or county hospitals
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| par and they are in the 28% tax bracket,
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| | Utility Companies - Electric or water
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| the tax free yield would be higher than
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| | companies could assess usage increases to
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| 6%. The formula is: Municipal stated rate
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| | raise money.
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| or coupon divided by 100 minus the tax
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| | Industrial - Some municipal issuers
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| bracket.The calculation would break down
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| | will work with private companies and use
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| like this:6% divided by 72 (100-28),
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| | the company's lease payments to the city
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| which equals 8.33%. This means that to
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| | as a revenue source for bond issues.
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| achieve a better return than this 6%
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| | Triple Tax Free Municipal
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| coupon bond, you would need equal to or
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| | BondsInvestors who buy municipal
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| better than 8.33% in a taxable
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| | securities issued within their own state
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| investment. A lower tax bracket would
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| | are exempt from federal, state and local
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| show a lower tax free yield.Type of
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| | taxation. An investor in California
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| Municipal IssuesThere are two main types
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| | should consider buying California
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| or ways a municipality can guarantee or
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| | municipal bonds above issues from outside
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| back it's bond. One way is through the
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| | the state. Retail or individual investors
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| taxing power of the municipality. This
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| | should only buy from within their state
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| would be called a General Obligation Bond
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| | because of this. Larger institutions will
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| or G.O. Bond. Another is called a Revenue
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| | normally buy from all over the
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| Bond, which uses specific revenue sources
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| | country.Municipal bonds should be a part
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| to secure the issue.General Obligation
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| | of most investor portfolios. They are
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| BondsThese are the most common and
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| | also a way of supporting your local
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| normally the better rated issues. A state
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| | area.For more information: Muni Bonds at
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| raising money and backing the bond issue
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| | Brokerjobs.comNick Hunter is the
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| with higher income or sales tax would be
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| | President of American Investment
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| considered a G.O. Bond. A school district
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| | Training, AIT and the owner of - A
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| rasing money through a broker dealer on a
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| | financial education and career website.
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