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Please explain what should the investor know about Corporate Bonds vs. Municipal Bonds before deciding to...

Please explain what should the investor know about Corporate Bonds vs. Municipal Bonds before deciding to invest.

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Corporate Bonds

Corporate bonds are those issued by large companies to raise capital for things like market research, development, and business expansion. As a investor you will receive the interest for holding the bond. However you will be subject to taxes for that interest. Suppose you received 1000 $ interest and tax rate is flat 20 % then you will loose 200 $ in form of taxes.

Municipal Bonds

They are issued by localities to fund public projects like construction of road, hospital systems, and schools etc. Same like corporate bond they may generate the income in form of interest. However they are not subject to any taxes so in this case if you receive 1000 $ you need not to pay any tax and whole amount will be in your pocket.

Therefore Municipal bond are less risky and are tax free as well. But on the flip side Interest from such bonds tend to be lower in comparision to the coporate bonds.

jeff jeffy answered 2 hours ago
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