assignment2b - To: Eric Brockett, BankZero Regional Manager...

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Unformatted text preview: To: Eric Brockett, BankZero Regional Manager From: Jonathan Abramson, Assistant Manager Subject: Bond Purchase There are several types of investments that the bank could use to maximize profits. One type of investments with a high amount of security and tax savings is municipal bonds as they achieve both goals. While Congress does have the ability to tax the profits from this type of investment, they choose not to. Because of this, municipal bonds are a good investment for the bank. The downside to purchasing municipal bonds is they pay lower interest than other types of securities. There are two types of municipal bonds. These are revenue and general-obligation municipal bonds. The major difference between the two is that a general-obligation bond is backed by the governments ability to tax its citizens while a revenue bond is dependent on a generation of revenue for a specific project. Revenue bonds might be used to build a stadium and should that specific project fail, the bonds may not be paid back and are therefore more risky than a general-...
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This note was uploaded on 09/07/2011 for the course ECON ECO 201 taught by Professor Unknown during the Spring '09 term at New York Institute of Technology-Westbury.

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