What is a municipal bond primarily used for?

A municipal bond is primarily used to finance public projects. These bonds are issued by government entities, such as states, cities, or counties, to raise funds specifically for initiatives that benefit the community. This includes the construction of schools, highways, hospitals, and other infrastructure projects that improve public facilities and services.

Investors in municipal bonds essentially lend money to these government entities, and in return, they receive interest payments, often exempt from federal taxes and sometimes state and local taxes as well. This feature makes municipal bonds an attractive investment option for those looking to support public development while potentially enjoying tax benefits.

The other options presented do not align with the primary purpose of municipal bonds. They are not meant for investing in corporate securities or funding private investments and do not serve as a means for issuing personal loans. Instead, the focus remains on supporting public projects that enhance community welfare and development.