Municipal bonds

Question

Municipal bonds

Quizplus · Accepted Answer

Municipal bonds, if sold at a discount, require the holder to pay federal income tax on the economic accrual. This is because the discount is considered to be a form of interest income over the life of the bond. Choices A, B, and D are incorrect because municipal bonds do not have to be backed by a specific asset, are not required to be registered with the SEC due to exemptions for government and municipal securities, and the 11th Amendment of the U.S. Constitution generally prohibits lawsuits against a state by citizens of another state or country, limiting the ability of holders to sue a state that defaults.

Municipal Bonds