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In: Finance

Which of the following will you choose and why? 1. corporate bond 2. municipal bond 3....

Which of the following will you choose and why?

1. corporate bond

2. municipal bond

3. Treasury

Solutions

Expert Solution

Ans:- Bonds are debt securities. Corporate Bonds are riskier as compared to municipal and Treasury bonds. Corporate bonds yield is higher than the other two bonds because the risk is highest among the three bonds.

Municipal Bond is issued by local and state government while Treasury bond is issued by the federal government. Municipal bonds are very less risky as compared to corporate bond but it is not risk-free as compared to the treasury bonds. Yields are low in both the municipal and treasury bonds as compared to the corporate bonds. Both municipal and Treasury bonds have certain Tax advantages.

As a risk-averse investor, I will choose Treasury bonds because it is risk-free debt security which pays interest twice a year and the Federal government takes guarantee for the Treasury bond so investors can count on it that they will get principal and interest on time. Therefore I will choose Treasury Bonds.

jeff jeffy answered 1 year ago
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