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About Municipal Bonds

Bonds with Special Investment Features

Variable-rate bonds.

The interest rate of these bonds is calculated periodically, and is typically based upon a percentage of prevailing rates for Treasury bills or other interest rates.

Put bonds.

Some bonds have a “put” feature which allows you to sell the bond at par value on a specified date long before its maturity date and recoup the principal and accrued interest.

Zero-coupon, compound-interest and multiplier bonds.

These are issued at a deep discount to the maturity value and do not make periodic interest payments. At maturity, an investor will receive one lump sum payment at maturity equal to principal invested, plus interest compounded semiannually at the original interest rate. Because they do not pay interest until maturity, their prices tend to be volatile. These bonds may be attractive if you seek to accumulate capital for a long-term financial goal such as retirement planning or college costs.

Insured municipal bonds.

Some municipal bonds are backed by municipal bond insurance specifically designed to reduce investment risk. In the unlikely event of payment default by an issuer, an insurance company, which guarantees payment, will send you both interest and principal when they are due.

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All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.