Series 52: Arbitrage Bond

Taken from our MSRB Municipal Securities Representative Qualification Examination

Definition of the term Arbitrage Bond...

a municipal bond issue that is created to get better interest rates that those on an outstanding issue. An arbitrage bond claims federal tax advantages at issue, but is found to violate federal arbitrage regulations. The interest payments on arbitrage bonds become retroactively taxable. However, the issuer and/or related parties may make payments to the IRS to avoid the having the interest payments taxed.

Since you're reading about Series 52: Arbitrage Bond, you might also be interested in:

Solomon Exam Prep Study Materials for the Series 52
Please Enable Javascript
to view this content!