SIE practice questioneasyCorporate Bonds
Which of the following is a feature commonly associated with corporate bonds?
- AThey are typically unsecured obligations✓ Correct answer
- BInterest is exempt from federal income tax
- CThey are issued by municipalities
- DThey are always convertible into stock
Explanation
Why A — They are typically unsecured obligations
Corporate bonds are often unsecured (debentures), relying on the issuer's creditworthiness. Interest from corporate bonds is taxable, not tax-exempt, and while some are convertible, not all are. Municipalities issue municipal bonds, not corporate bonds.
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