If You Are Seeking Federally Tax-Exempt Income, Which Type of Mutual

question 31

Multiple Choice

If you are seeking federally tax-exempt income, which type of mutual fund should you purchase?

• A) Junk bond fund
• B) Intermediate corporate bond fund
• C) Municipal bond fund
• D) Short-term government bond
• E) World bond fund

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Definitions:

Preferred Stock

A type of equity security that typically offers fixed dividends and has priority over common stock in asset liquidation.

Unpaid Dividends

Dividends declared by a company's board of directors that have not yet been paid out to shareholders.

Dividend Yield

An indicator demonstrating the yearly dividends paid by a company compared to its stock price.

Constant Growth Stock

A stock assumed to pay dividends that grow at a constant rate indefinitely, making it possible to use dividend discount models for valuation.