Characteristics, Uses and Taxation of Investments - Zero-Coupon and Municipal Bonds
Types of Municipal Bonds
Zero-Coupon Bonds: corporations are the typical issuers (please refer to the discussion of treasury STRIPS for a description of the private sector-created
c. Municipal Bonds: these are interest-bearing certificates issued by municipalities (states, cities, counties, school districts, parishes, etc.). They are held in taxable portfolios of wealthy individuals in higher tax brackets to take advantage of the tax-exempt yield. Residents of a state with a state income tax that hold municipal bonds for that state often enjoy exemption from state income tax. Finally, interest income on obligations of a
Example: Pretax yield = tax - exempt yield/1-marginal tax rate. For an investor in the 30% marginal tax bracket, a municipal bond paying 5% would have a taxable equivalent yield of 7.14% calculated as follows. 7.14%=5%/1-30%. One may infer from the following table that the higher the individual's marginal tax bracket, the greater the advantage of using a municipal bond.
Municipal Bond Yield
Bonds & Fixed IncomeHere's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
Bonds & Fixed IncomeConsidering muni bonds? Here's a look at their pros and cons.
Mutual Funds & ETFsThese versatile instruments have become popular with investors in higher tax brackets and fill a specific niche in the wide selection of fixed-income offerings.
Bonds & Fixed IncomeInvesting in these bonds may offer a tax-free income stream but they are not without risks.
TaxesSeveral factors affect the taxable interest that must be reported. Learn more here.
Mutual Funds & ETFsMunicipal bonds and bond funds differ in several ways, which is partly why they complement each other well.
Bonds & Fixed IncomeMunicipal bonds come in two types. General obligation bonds repay their holders through taxes. They often have low interest rates, but they’re safe.
Mutual Funds & ETFsTax free municipal bond ETFs are an excellent way to build wealth slowly. Here are 4 you should consider.
Bonds & Fixed IncomeUnderstand how the addition of municipal bond mutual funds can enhance a portfolio, and learn the top-rated municipal bond funds to consider for 2016.
Investing BasicsIf you're looking to have some bonds in your portfolio for 2012, we tell you what to look for.
A mutual fund that invests in municipal bonds, or "munis." Municipal ...
The yield on a municipal bond, when the effect of reduced taxes ...
A debt security issued by a state, municipality or county to ...
A strategy that consists of building a portfolio of tax-exempt ...
The status accorded to municipal bonds for which interest is ...
A municipal bond that is backed by the pledge of the issuer (generally ...
Discover information about trading municipal bonds, specifically the various tax implications municipal bonds have at state ... Read Answer >>
Learn more about municipal bonds, including the various types of bonds issued and the purposes of municipal bond funds, such ... Read Answer >>
Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
At its core, a triple tax-free municipal bond is just like any corporate bond: it is a debt instrument, a loan given to a ... Read Answer >>
The primary difference between municipal bonds - also known as "munis" - and money market funds is that municipal bonds are ... Read Answer >>
Learn why the price of zero coupon bonds is volatile and why some investors may wish to hold them in retirement accounts ... Read Answer >>