MUNICIPAL BONDS

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SUMMARY

This module enables participants to analyze the investor and issuer applications of municipal bonds. A brief survey of the municipal bond marketplace is followed by a technical presentation of investors' and issuers' considerations when dealing with municipal bonds.

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OBJECTIVES

Upon completion of this module, participants will be able to:

1. List various types of municipal bonds.

2. Calculate the pre–tax yield to maturity of a municipal bond.

3. Calculate the price of a municipal bond.

4. Calculate the taxable equivalent yield of a municipal bond.

5. Discuss the tax ramifications of discount pricing.

6. Calculate the adjustment to the taxable equivalent yield when a municipal bond sells at a discount.

7. Identify the call features of a municipal bond.

8. Calculate the yield to call of a municipal bond.

9. Calculate the cross–over yield.

10. Determine the strategy of a call provision.

11. Calculate the net interest cost to the municipal bond issuer.

12. Discuss the true interest cost to the municipal bond issuer.

13. Compare net interest cost and true interest cost.

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