Municipal bonds generally are tax-exempt debt obligations of states, cities, towns, municipalities, municipal authorities and governmental entities. They are issued to build schools, tunnels and bridges or to finance infrastructure repairs or improvements. Like most debt obligations, they function like promissory notes. The issuer of these bonds agrees to make scheduled interest payments, at a specified rate, for a fixed period of time, and return the principal at maturity. Investors buy municipal bonds because the interest earned is free of Federal income taxes and also may be free of state and/or local income taxes if purchased by residents of the issuing state. Income for some investors may be subject to the Federal Alternative Minimum Tax (AMT).