Name InstructorCourse Date Traverse County Municipal bond is issued by localities and states for purposes of supporting expensive enormous and long-term projects (Schwert 34). Traverse County has recently been involved in the incorporation of a government structure expected to cost $10 It is less risky compared to tax-exemptions since the taxpayers will pay for the funds accrued even when the project has not made return on investments. Works Cited Schwert Michael. "Municipal bond liquidity and default risk." The Journal of Finance 72.4 (2017): 1683-1722. [...]
Traverse County needs a new county government building that would cost $10 million. The politicians feel that voters will not approve a municipal bond issue to fund the building because it would increase taxes. They opt to have a state bank issue $10 million of tax-exempt securities to pay for the building construction. The county then will make yearly lease payments (of principal and interest) to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval. Required Do you think the actions of the politicians and the bankers in this situation are ethical? In terms of risk, how do the tax-exempt securities used to pay for the building compared to a conventional municipal bond issued by Traverse County?