Series 7 - General Securities Representative Exam
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A Build America Bond has a 5% coupon. What is interest rate paid by the municipal issuer?
5%
A
4.95%
B
3.18%
C
3.25%
D
Explanations
Remember, BAB bonds feature lower cost for the BAB municipal issuer because the US Treasury reimburses them 35% of the interest payments. So 5.00% X .65 = 3.25%