SIE practice questioneasyMunicipal Bonds
What is a primary benefit of investing in municipal bonds?
- AThey have no default risk
- BThey offer the highest yields in the market
- CThey are guaranteed by the U.S. government
- DInterest is often exempt from federal income tax✓ Correct answer
Explanation
Why D — Interest is often exempt from federal income tax
Municipal bonds offer tax-exempt interest at the federal level. They don’t always have the highest yields, are not U.S. government-guaranteed, and can have default risk.
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