Products & Their RisksQuestion 22 of 398
An investor wants Treasury interest that is subject to federal income tax but EXEMPT from state and local income tax. This tax treatment applies to:
a.Corporate bond interest
b.U.S. Treasury note interest
c.Municipal bond interest in the investor's home state
d.Bank certificate of deposit interest
Explanation
Interest on U.S. Treasury securities is taxable at the federal level but exempt from state and local income tax. Corporate and CD interest are taxable at all levels, while municipal interest is generally federally tax-exempt, the opposite pattern.
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