Answer:
D. Municipal bond issued in the taxpayer's state of residence.
Explanation:
Municipal bond -
It is the debt security , which is furnished by a country or any municipality , in order to finance the capital expenditure , like the construction of hospitals , school , bridges and highways , is referred to as the municipal bond.
These bonds are free from the federal taxes , local and state taxes , therefore is fruitful for people with high income tax brackets.
Hence, from the given statement of the question ,
The correct option is Municipal bond .
