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The Cost of Inefficient Coupons on Municipal Bonds

Author

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  • Hopewell, Michael H.
  • Kaufman, George G.

Abstract

Ceteris paribus, investors prefer to purchase municipal bonds selling close to their par value. That is, investors are willing to purchase at the lowest yield a municipal bond alike in all respects to other municipal bonds, but with a coupon that permits it to be sold at or near its par value. Conversely, investors are willing to purchase municipal bonds with coupons that cause them to be sold at prices either greatly above or greatly below par only at penalty or premium yields relative to similar par bonds.

Suggested Citation

  • Hopewell, Michael H. & Kaufman, George G., 1974. "The Cost of Inefficient Coupons on Municipal Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(2), pages 155-164, March.
    • Handle: RePEc:cup:jfinqa:v:9:y:1974:i:02:p:155-164_01
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    Cited by:

    1. Bourdeau-Brien, Michael & Kryzanowski, Lawrence, 2019. "Municipal financing costs following disasters," Global Finance Journal, Elsevier, vol. 40(C), pages 48-64.

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