Tax-exempt bonds:
A) generate higher returns for the bondholder when purchased through a tax-exempt retirement account.
B) are not affected by changes in yields on taxable bonds.
C) are most beneficial to those who pay higher income tax rates.
D) include U.S. Treasury securities because the Internal Revenue Service does not charge income tax on interest earned from these bonds.

Question

Quizplus · Accepted Answer

Tax-exempt bonds are most beneficial to those who pay higher income tax rates because they allow investors to earn tax-free income. This means that the higher your tax bracket, the more valuable the tax-exempt status of the bond becomes.

Tax-Exempt Bonds