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Which of the following is an effect of advance refunding on a municipal bond issue?
A) Lowered rating.
Defeasement Advance refunding (or pre-refunding) is in part the establishment of an escrow account in connection with an outstanding bond issue. Funds from a subsequent issue, deposited in the escrow account and generally invested in Treasury securities, will be used to call the bonds on the first available call date. When the bonds are escrowed to maturity, the outstanding debt is considered defeased.
Defeasement – A process to substitute collateral when looking to sell or refinance an existing property which was acquired through a real-estate loan.
Plainly speaking, the defeasement process involves the remainder of the amount owing on the loan being used to purchase government securities which are then given to the lender in exchange for releasing the property for refinance or sale by the borrower.
Exam Series 6 topic 1 question 115 discussion
Suggested Answer: A ️
The false statement is that a closed-end investment company may not issue preferred stock. Although open-end companies (mutual funds) are prohibited from doing so, this is not a restriction governing closed-end companies. Closed-end companies shares sell on exchange floors and may trade below net asset value. Closed-end companies may be either diversified or non-diversified, and the income earned by the company and distributed to its shareholders is not taxed at the investment company level. It is taxed at the shareholder level only.
by lolojepu at April 6, 2025, 1:17 a.m.
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