Glossary of Municipal Securities Terms

AUCTION RATE PREFERRED SECURITIES (ARPS)

Securities, in some cases issued by a tax-exempt bond fund, as preferred shares earning periodic dividend payments based on a rate of return determined through a Dutch auction procedure. Investment earnings realized by the bond fund are applied first to pay dividends on ARPS before being allocated to holders of common shares of the bond fund. See: BOND FUND; DUTCH AUCTION. Compare: AUCTION RATE SECURITIES.

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