SIE Exam Question 682: Answer and Explanation

Question: 682

Which of the following is/are correct regarding interest paid from municipal bonds?

(1) Interest paid from municipal bonds is not taxed by the federal government.

(2) Interest paid from municipal bonds is never taxable at the state level.

• A. (1) only
• B. (2) only
• C. Both (1) and (2) are correct.
• D. Neither (1) or (2) are correct.

Correct Answer: A

Explanation:

Interest paid from municipal bonds is not taxed by the federal government. The bond interest may also be tax-exempt by various states if certain requirements are met.