Definition of Municipal Bond Fund

Municipal Bond Fund is a mutual fund that invests in a portfolio of municipal debt in an effort to produce income which is free from federal income taxes for its investors.

Applying "Municipal Bond Fund" to Securities Exams:

In general muni bonds provide investors with tax relief, in that the interest is free from federal taxation. When an investor purchases a muni bond fund they receive dividends that are federally tax free. It is important to note that there can be a taxable event, even if the bond fund is "tax free". If the fund makes a capital gain distribution to its investors, that distribution triggers a taxable event for the investor.

Preparing for an Exam?

Receive 15% off all your Securities Exam Prep materials

Please wait....