Which of the following is a reason municipal bonds offer lower rates of interest income for their investors?
A) They are able to avoid interest rate risk.
B) They are able to avoid reinvestment rate risk.
C) They are able to offer reduced credit risk as they are backed by the federal government.
D) They are tax exempt-at least at the federal level.

Question

Quizplus · Accepted Answer

Municipal bonds offer lower rates of interest income because the interest earned is often exempt from federal income taxes, and sometimes from state and local taxes as well. This tax-exempt status makes them attractive to investors, even at lower interest rates, compared to taxable bonds.

Which of the Following Is a Reason Municipal Bonds Offer