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The Financial System

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The Financial System Bonds are people that are holders of a corporation or government body. The bondholder is issued a quantity of money and a rate of interest depends on the amount the bondholder needs to pay. A firm obtains long term debt capital by issuing bonds, which federal, state and local governments can also get some funds too. The bondholders also have a claim on the firm’s assets. There are different types of bonds. One type of bond is a municipal bond. These bonds are issued by state or local governments, however there two different types of municipal bonds. Revenue bonds are bonds used to pay for things that will give revenue such as toll roads or bridges. Another type of municipal bonds is general obligation bond. These bonds are used to pay for things that will give revenue such as a State Police Post. Municipal bonds have an important feature that will exempt their interest payments from federal income tax and usually have a lower interest rate than other bonds. Another type of bond is a
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