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 than government bonds because they carry greater credit risk. They are generally subject to federal income tax, can be fixed- or floating-rate, and are not guaranteed by the U.S. Treasury.
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