SIE practice questionhardMunicipal Bond Suitability
Municipal bonds may be unsuitable for which type of investor?
- AInvestor in a low tax bracket✓ Correct answer
- BInvestor seeking income exempt from federal taxes
- CHigh net worth investors
- DInvestors subject to high state income taxes (on in-state bonds)
Explanation
Why A — Investor in a low tax bracket
Municipal bonds' tax benefits are most valuable to those in higher tax brackets. Low-tax investors may do better with taxable bonds' higher yields.
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