SIE practice questioneasyCorporate Bonds
Which of the following statements best describes a feature of corporate bonds compared to government bonds?
- ACorporate bonds are only issued with fixed interest rates.
- BCorporate bonds are exempt from federal income tax.
- CCorporate bonds generally offer higher yields due to greater credit risk.✓ Correct answer
- DCorporate bonds are guaranteed by the U.S. Treasury.
Explanation
Why C — Corporate bonds generally offer higher yields due to greater credit risk.
Corporate bonds usually offer higher yields because they carry more credit risk than government bonds. Option B is incorrect because most corporate bonds are subject to federal tax. Option C is incorrect—corporate bonds can also have floating rates. Option D is incorrect because the U.S. Treasury does not guarantee corporate bonds.
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