Series 7 Exam Question 36: Answer and Explanation

Question: 36

Which of the following types of municipal bond issues is usually underwritten on a competitive basis?

• A. General obligation
• B. Revenue
• C. IDR
• D. Equipment trust

Correct Answer: A

Explanation:

A. Competitive offerings are ones in which the municipal issuer takes bids from several underwriters to ensure that they get the lowest interest cost to the taxpayers in the community who are backing the bonds. Out of the choices listed, General Obligation (GO) bonds are the only ones backed by taxes. Therefore, although not a requirement, almost all municipal GO bonds are underwritten on a competitive basis.