Although originally issued as either revenue or general obligation bonds, municipals are sometimes prerefunded and called ________.

Question

Quizplus · Accepted Answer

Prerefunded municipal bonds are issued to replace outstanding bonds with lower interest rate bonds. This helps the issuer reduce interest rate costs and also extends the life of the original bond issue. These bonds are often considered lower-risk investments because they are backed by the escrow account that holds the funds used to redeem the original bonds. The other choices (A, B, and D) do not accurately describe prerefunded municipal bonds.

Although Originally Issued as Either Revenue or General Obligation Bonds