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3 years ago

Which kind of bond pays interest which is exempt from tax?

Business

2 answers:

Brut [27]3 years ago

8 0

<u>The option c is correct. municipal bonds pay interest which is exempt from tax. </u>

Further Explanation:

The interest from municipal bonds is exempted from tax in order to make the investment in public projects interesting to investors. It also enables governments to carry a lower rate of interest as compared to other options of investments.

Justification for the correct and incorrect answer:

Treasury Bonds: This option is incorrect.

It is issued by the U.S. government for not more than one year. These bonds are exempted from state taxes but are taxable at the federal level.

Junk Bonds: This option is incorrect.

These bonds are issued by governments and corporations and carry a high risk of default in comparison to other bonds. They are also taxable.

Municipal Bonds: This option is correct.

Corporate Bonds: This option is incorrect.

These bonds are an instrument of debt issued by a company. The risk in these bonds is higher than the government bonds. They are taxable at both the state and federal level.

Learn more:

1. Learn more about the interest on the bond

brainly.com/question/7268541

2. Learn more about the corporate bond

brainly.com/question/2393758

3. Learn more about the tax-free interest

brainly.com/question/1442514

Answer details:

Grade: High School

Subject: Accounting

Chapter: Debentures

Keywords: Which kind of bond pays interest which is exempt from tax, treasury Bonds, junk bonds, municipal bonds, corporate bonds.

pickupchik [31]3 years ago

7 0

The answer to the question is C. Municipal Bonds.

The interest income received by the holders of the municipal bonds or sometimes called as local authority bonds which is issued by local government or territory, depending on the applicable income tax laws they may be exempt from state income tax and and is often excludable from gross income for federal tax income purposes.

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