In the dimension of default risk, the municipal bonds are considered as ___________?
Correct answer: B. not default risk free
- A. default risk free
- B. not default risk free
- C. not indexed
- D. must be indexed
Explanation
Municipal bonds are not completely free from default risk because the issuing government may face weak revenues or financial distress. Their tax advantages or public purpose do not guarantee repayment.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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