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Municipal BondsFollowing the Guidelines of the American Psychological AssociationNameProfessorSchoolCourseDateIntroductionThis essay will locate a U.S. municipal bond. The bond that I have located is according to U.S. News & World Report (2016) and is a T. Rowe Price Tax Free High Yield Fund. The U.S. News & World Report (2016) ranks this municipal bond as having a high yield. This essay will describe the bond, the bond’s current yield and the bond’s yield to maturity, plus the bond’s credit rating. I will also respond to the questions of is the bond an investment-grade bond? How can I tell this? Do I think that the bond will experience much interest rate risk? I will also justify my decision. When federal, state and local governments issue securities, I will answer what key roles do they play in the financial markets? I will answer how do these decisions affect me? First, I will begin with describing the bond.Bond DescriptionThe bond T. Rowe Tax Free High Yield Fund is ranked number one amongst the high yield bonds according to the U.S. News & World Report (2016). The investment seeks a high level of income exempt from federal income taxes. Normally, at least 80% of the fund's income will be exempt from federal income taxes. However, up to 20% of the fund's income could be derived from securities subject to the alternative minimum tax. It generally seeks higher yielding municipal bonds, including those that are rated noninvestment grade (BB and lower, or an equivalent rating) by a major credit rating agency or by T. Rowe Price, known as "junk" bonds (U.S. News & World Report, 2016).On October 21, 2016 alone, this municipal bond rose from $12.1900 USD on the index to $12.3340 USD. The price of the bond is $12.19 USD. The daily change is zero. Changes are at 0%. The performance of the fund, “the fund has returned 8.22 percent over the past year, 8.41 percent over the past three years, 7.01 percent over the past five years, and 5.08 percent over the past decade” (U.S. News & World Report, 2016). The bond has a hypothetical growth of $10,000 USD. Here is a list of the top holdings associated with this bond:St John Baptist Parish La Rev Rev 5.125%1.03Golden St Tob Securitization C Toba 4.5%0.99Texas Mun Gas Acquisition & Su Sr 6.25%0.92Salt Verde Finl Corp Sr Gas Re Senior 5%0.88Metropolitan Pier & Exposition Bds 5.25%0.82Tobacco Settlement Fing Corp N Asset 5%0.79Virginia Small Busn Fing A Rev Bds 6%0.76Buckeye Ohio Tob Settlement Fi Toba 6.5%0.75Liberty N Y Dev Corp Rev Rev Bds 5.25%0.74Pennsylvania St Tpk Commn Tpk Rev Bds 5%0.68The overall rating for this municipal bond is 7.8 out of 10. The risk for this bond is considered above average when you compare it to other bonds.Interest Rate RiskI think the bond will experience in the short-term great interest rate risk due to the current American election. Usually during election time, there is uncertainty in financial markets and this would affect this municipal bond. For a long-term forecast, I predict that this bond will continue to show growth. Roles of Government in Financial MarketWhen the government invests in financial markets, this gives investors and Americans an opportunity to build wealth if they invest wisely. How this would affect me is if I entered into the municipal bond market and started investing, I could grow wealthy potentially through these pursuits depending on the financial markets.ConclusionThis essay located a U.S. municipal bond. The bond that I have located is according to U.S. News & World Report (2016) and is a T. Rowe Price Tax Free High Yield Fund. The U.S. News & World Report (2016) ranks this municipal bond as having a high yield. This essay described the bond, the bond’s current yield and the bond’s yield to maturity, plus the bond’s credit rating. I also responded to the questions of is the bond an investment-grade bond? How could I tell this? Do I think that the bond experienced much interest rate risk? I also justified my decision. When federal, state and local governments issue securities, I answered what key roles do they play in the financial markets? I answered how do these decisions affect me? ReferencesU.S. News & World Report. (2016). Mutual Funds Ranking. Washington, DC: U.S. News &World Report. Retrieved from: Yahoo! Finance. (2011). Bond screener. New York: Yahoo. Retrieved from ................
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