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Economic Definition of state bonds. Defined.

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Term state bonds Definition: Are medium or long-term financial instruments (called bonds) issued by state governments to borrow funds used to build schools, highways, parks and other public projects. An attractive feature of these financial instruments is that are exempt from federal income tax and are also usually exempt from state income tax. Commercial banks, corporations, and others with large sums of funds to lend usually purchase these bonds.

 

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