SIE practice questionmediumMunicipal Bonds
Which statement about municipal bonds is TRUE?
- AThey always have lower yields than Treasury bonds.
- BThey are typically issued by corporations.
- CInterest income is generally exempt from federal income tax.✓ Correct answer
- DThey are regulated by the FDIC.
Explanation
Why C — Interest income is generally exempt from federal income tax.
Municipal bond interest is usually exempt from federal taxes. They are issued by state/local governments, not corporations (B). Their yields depend on the issuer (C), and they are regulated by MSRB, not FDIC (D).
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