Future Business Leaders of America (FBLA) Securities and Investments Practice Test

Municipal bonds are primarily issued for what purpose?

1. Building infrastructure

2. Funding corporate projects

3. Investing in foreign markets

4. Selling on the stock exchange

The correct answer is: Building infrastructure

Municipal bonds are primarily issued to raise funds for public projects and infrastructure development. This can include the construction and improvement of roads, schools, hospitals, and other community facilities. Because they are issued by local, state, or other government entities, the proceeds from these bonds are used to finance initiatives that can benefit the public and improve the quality of life in the community. Investors often find municipal bonds attractive due to the tax-exempt status that many of them offer, meaning interest earned may not be subject to federal income tax and, in some cases, state income tax as well. This makes them a popular investment choice for individuals looking to support community projects while also gaining tax advantages. The other options relate to different purposes not typically associated with municipal bonds. Funding corporate projects would be more aligned with corporate bonds, while investing in foreign markets and selling on the stock exchange pertain to other investment types and trading mechanisms that do not focus on funding public infrastructure.