A bond premium refers to the amount the purchaser pays in buying a bond that exceeds the face or call value of the bond. This premium can be amortized, reflecting the true interest rate being less than the coupon rate.
Industrial Development Bonds (IDBs) are debt obligations issued by state or local governments for funding the capital investments in the trade or business operations of nonexempt persons.
An industrial revenue bond (IRB) is a type of municipal bond issued to finance industrial development projects for private corporations. They are typically used for the construction or acquisition of facilities and equipment, encouraging economic growth and job creation.
A moral obligation bond is a tax-exempt bond issued by a municipality or a state financial intermediary and backed by the moral obligation pledge of a state government. The state's obligation to honor the pledge is moral rather than legal because future legislatures cannot be legally obligated to appropriate the funds required.
Yield equivalence is the rate of interest at which a tax-exempt bond and a taxable security of similar quality provide the same after-tax return. This concept is essential for investors comparing tax-exempt and taxable investment options.
