SIE practice questioneasyMunicipal Bonds
Which of the following is a primary benefit of investing in municipal bonds?
- ALow default risk
- BTax-exempt interest income✓ Correct answer
- CHigh returns
- DGuaranteed by the U.S. government
Explanation
Why B — Tax-exempt interest income
The main benefit of municipal bonds is that the interest income is often exempt from federal (and sometimes state) income tax. They may have low default risk, but are not guaranteed by the U.S. government and typically do not offer high returns.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Debt Securities questions
- Which statement best describes Treasury bills (T-bills)?
- An investor in the 32% federal tax bracket is comparing a municipal bond yielding 3.5% to a corporate bond. What…
- Treasury Inflation-Protected Securities (TIPS) adjust which component for inflation?
- When a bond is sold between interest payment dates, the buyer pays the seller:
- Which securities are regulated by the Municipal Securities Rulemaking Board (MSRB)?
- An investor purchases a corporate bond at a premium. How does the premium affect the investor's cost basis over time?
- Which characteristic is unique to Treasury bills (T-bills) compared to Treasury notes and bonds?
- A stock pays an annual dividend of $2.40 per share and is currently trading at $60. What is the dividend yield?