SIE Exam Practice Question 457
Question: 457
When contrasting a corporate bond to a municipal bond of the same quality and maturity, you would observe which of the following?
Correct Answer: A
Explanation:
A: When comparing a corporate bond and a municipal bond of the same quality and maturity, the corporate bond would have a higher coupon rate. Interest earned on municipal bonds is free from federal income taxes and, as such, the coupon rate is lower than equal quality corporate bonds, which are subject to taxation.
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