Wealthy investors may prefer the favorable tax treatment of investments such as

Question

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Municipal bonds are issued by state and local governments to finance public projects. The interest income generated by these bonds is exempt from federal income tax and sometimes from state and local taxes as well. This makes them an attractive investment option for wealthy investors who want to minimize their tax liabilities. Corporate bonds and common stock, on the other hand, are subject to federal and state taxes, while the tax treatment of preferred stock may vary depending on the specific company's dividend policy. Therefore, B) Municipal bonds are the best choice for wealthy investors who prefer favorable tax treatment.

Wealthy Investors May Prefer the Favorable Tax Treatment of Investments