Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?
A)Corporate bond, municipal bond, U.S.government bond
B)Corporate bond, U.S.government bond, municipal bond
C)Municipal bond, U.S.government bond, corporate bond
D)U.S.government bond, municipal bond, corporate bond

Question

Quizplus · Accepted Answer

Corporate bonds generally pay the highest interest rates due to higher risk. U.S. government bonds pay lower rates due to lower risk, and municipal bonds often pay the lowest rates because their interest is often tax-exempt.

Assume the Bonds Below Have the Same Term and Principal