Give two reasons why an issuing municipality would want to refund an outstanding bond issue
What will be an ideal response?
There are three reasons why a municipal issuer may refund an issue by creating an escrow fund. First, many refunded issues were originally issued as revenue bonds. Included in revenue issues are restrictive-bond covenants. The municipality may wish to eliminate these restrictions. The creation of an escrow fund to pay the bondholders legally eliminates any restrictive-bond covenants. This is the motivation for the escrowed-to-maturity bonds. Second, some issues are refunded in order to alter the maturity schedule of the obligation. Third, when interest rates have declined after a municipal security has been issued, there is a tax arbitrage opportunity available to the issuer by paying existing bondholders a lower interest rate and using the proceeds to create a portfolio of U.S. government securities paying a higher interest rate. This is the motivation for the prerefunded bonds.
11.The following statement appeared in a publication by the Idaho State Treasurer's Office:
"Each year since 1982 the Idaho State Treasurer has issued a State of Idaho Tax Anticipation Note ‘TAN'. These notes are municipal securities that are one-year, interest-bearing debt obligations of the State of Idaho. The distinguishing characteristic of a municipal security is that the interest earned on them is exempt from federal income tax. Idaho municipal securities are further exempt from state income taxes. Idaho's TANs are issued in multiples of $5,000 which is the amount paid when the bond matures. Idaho TANs are issued with a fixed interest rate."
Why is a TAN issued by a municipality?
You might also like to view...
Under what circumstances are businesses more likely to listen and respond to NGOs?
What will be an ideal response?
When pledging accounts receivable
A. title to the receivables reverts to the lender. B. the pledges are usually made with recourse. C. the pledge arrangements become the new valuation methodology entered in the accounting records. D. collection responsibility reverts to the lender.
Which is the most appropriate attire for a female interviewee?
a. black skirt, colorful blouse, and matching jewelry b. black pants and light colored blouse c. black, dark grey, or dark blue suit with a skirt, light colored blouse, and minimal jewelry and makeup d. there is no difference between acceptable attire for males and females in the modern day
External auditors can cooperate with and use evidence gathered by internal audit departments that are organizationally independent and that report to the Audit Committee of the Board of Directors
Indicate whether the statement is true or false