Future Business Leaders of America (FBLA) Personal Finance Practice Test

A municipal bond is not typically issued by which of the following entities?

1. State governments

2. Local governments

3. Federal government

4. City authorities

The correct answer is: Federal government

A municipal bond is a type of debt security that is issued by local and state governments to finance public projects such as schools, highways, and other infrastructure. The funds raised from municipal bonds are typically used for purposes that benefit the public at large. The federal government does not issue municipal bonds. Instead, it issues Treasury securities, such as Treasury bills, notes, and bonds, which are fundamentally different from municipal bonds. Treasury securities are used to fund government operations and manage national debt. Since municipal bonds are specifically associated with state or local government projects, the federal government’s lack of involvement in this particular type of financing clearly identifies it as the correct answer. In contrast, state governments, local governments, and city authorities regularly issue municipal bonds as a means to raise funds for various public services and infrastructure projects within their jurisdictions.