Which of the following statements are true regarding municipalbonds?I) A municipal bond is a...

Which of the following statements are true regarding municipal bonds?

I) A municipal bond is a debt obligation issued by state or local governments.
II) A municipal bond is a debt obligation issued by the federal government.
III) The interest income from a municipal bond is exempt from federal income taxation.
IV) The interest income from a municipal bond is exempt from state and local taxation
in the issuing state.

A) I, II, and III only
B) I, III, and IV only
C) I and IV only
D) I and III only
E) I and II only

Solutions

Expert Solution

Municipal bonds are bonds that are exempt for tax in certain countries. Government and municipal bonds are exempt for tax. Investing in such bonds provide tax benefits.

Municipal bonds are issued by states, cities, counties and other government entities. So, statement II is wrong.

Hence, the answer is option b.

jeff jeffy answered 1 year ago

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