Taxes play an important role in bond returns because:
A) All interest from owning bonds is taxed
B) All governments (federal, state, municipal) tax bonds similarly
C) Some bond interest is exempt from some government taxation, so after tax returns across bonds can vary considerably
D) Only U.S. Treasury bonds are tax-exempt, so investors should always seek higher returns from other bonds

Question

Quizplus · Accepted Answer

Some bond interest is exempt from some government taxation, so after tax returns across bonds can vary considerably. Therefore, taxes play an important role in bond returns as the after-tax return on a bond can significantly affect its overall return.

Taxes Play an Important Role in Bond Returns Because