Which of these is included in the return on a municipal bond but excluded from the return on a US Treasury bond?

Question

Quizplus · Accepted Answer

Municipal bonds often have a taxability premium because the interest income from these bonds is usually exempt from federal income taxes, and sometimes from state and local taxes as well, depending on where the investor lives and where the bond was issued. This tax advantage is not present in U.S. Treasury bonds, whose interest is subject to federal income tax. Liquidity premium might be included for both, but it's the taxability premium that is specifically relevant and differentiates municipal bonds from U.S. Treasury bonds in this context.

Which of These Is Included in the Return on a Municipal