The option c is correct. municipal bonds pay interest which is exempt from tax.
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:
a.
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.
b.
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.
c.
Municipal Bonds: This option is correct.
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.
d.
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
https://brainly.com/question/7268541
2. Learn more about the corporate bond
https://brainly.com/question/2393758
3. Learn more about the tax-free interest
https://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.
