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

Taxes can have a significant impact on bond returns as some bond interest may be exempt from certain types of government taxation, leading to variation in after-tax returns across various bonds.

Taxes Play an Important Role in Bond Returns Because