Investment VehiclesQuestion 24 of 110
A U.S. Treasury bond differs from a corporate bond in which key respect?
a.Treasury bonds carry higher default risk
b.Treasury bonds pay no interest
c.Treasury interest is exempt from all federal, state, and local taxes
d.Treasury interest is exempt from state and local income tax but subject to federal tax
Explanation
Interest on U.S. Treasury securities is subject to federal income tax but exempt from state and local income taxes. Treasuries are backed by the full faith and credit of the U.S. government and carry minimal default risk. Corporate bond interest is generally taxable at all levels.
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