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.