A debt security issued by state, local, or other government entities to fund public projects. Interest income is typically exempt from federal income tax and may be exempt from state taxes where issued. Municipal bonds carry risks including interest rate changes, call risk, market fluctuations, and the possibility of default. Some may be subject to the federal alternative minimum tax. Prices fluctuate daily, and bonds purchased at a premium may lead to losses. Interest income may sometimes be taxable after purchase.