Rose wants to invest in a bond fund.She is a very conservative investor with a high marginal tax rate.Which one of the following types of bond funds might be most suited for her situation?

Question

Quizplus · Accepted Answer

Short-term municipal bond funds are tax-exempt at the federal level and may also be tax-exempt at the state and local levels for investors who reside in the state where the bonds were issued. This makes them an attractive option for investors with high marginal tax rates who want to minimize their tax liability while maintaining a conservative investment strategy. High-yield corporate bond funds (A) and mortgage bond funds (E) are riskier investments and may not provide the stability and predictability that a conservative investor like Rose is looking for. Long-term world bond funds (B) and single-state corporate bond funds (D) may not offer the same level of tax benefits as short-term municipal bond funds.

Rose Wants to Invest in a Bond Fund