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Bonds

David Lerner Associates Offers Various Types of Municipal Bonds

Municipal Bonds are:
A pledge or a binding agreement that the issuer, usually public bodies and agencies such as states, cities, counties, school districts, governmental agencies, and authorities makes to the holder of the bond to pay a fixed sum of money on a definite date at a fixed rate of interest.

Tax-Free Municipal Bonds are:
Municipal bonds with interest that is excluded from the gross income of its owners for federal income tax purposes. The interest may also be exempt from state and local taxation for those living in the state where the bonds were issued. Tax-exempt municipal bonds are issued for a variety of public purposes, including the construction of highways, bridges, or schools.
» Learn more about Tax-Free Municipal Bonds

Taxable Municipal Bonds are:
Municipal bonds with interest that is not excluded from the gross income of its owners for federal income tax purposes. Some taxable municipal bonds are issued for purposes that may not qualify for tax-exemption, including construction of sports stadiums, funding pension liabilities, and housing projects.
» Learn more about Taxable Municipal Bonds

There are risks inherent in investing. Municipal Bonds carry risks including:

Interest rate or market risks: An increase in interest rates may reduce the market value of a bond. Bond prices move inversely to interest rates. Long-term bonds are more exposed to interest rate risk than short-term bonds. 

Duration risk: The sensitivity of a bond’s price to a one percent change in interest rates. The higher a bond’s duration, the higher its sensitivity to changes in interest rates. 

Default risk: Changes in an issuer's financial condition can effect its abilty to pay outstanding debt obligations. This can adversely effect the market value of the investment as well. 

Credit risks: Independent rating agencies (Moody's, S&P) evaluate the credit-worthiness of bond issuers and assign credit ratings indicating an issuer's ability to pay. Learn more about bond credit ratings here. It's important to note that credit ratings can change over time and a high credit rating does not guarantee a bond's market value stability or liquidity.