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.
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