Which of the following statements is true?
A)Municipal bond interest is subject to explicit federal tax.
B)Municipal bond interest is subject to implicit tax.
C)Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk.
D)All of these statements are true.
E)None of these statements is true.

Question

Quizplus · Accepted Answer

Municipal bond interest is not subject to explicit federal tax, but it may be subject to implicit tax such as the alternative minimum tax (AMT) or state and local taxes. Municipal bonds generally pay a lower interest rate than comparable corporate bonds, as they are considered less risky due to their tax-exempt status. Therefore, statement C is false. Statements A and D are also incorrect.

Which of the Following Statements Is True