Question

which of the following kinds of bonds earn interest?
i. corporate bonds
ii. bonds selling at a discount
iii. municipal bonds
a. i and ii
b. ii only
c. i and iii
d. i, ii, and iii

Explanation:

• Corporate bonds (I) earn interest as companies pay periodic interest to bondholders.
• Bonds selling at a discount (II) still earn interest; the discount is related to purchase price vs par value, but interest is paid based on par value.
• Municipal bonds (III) earn interest (often tax - exempt) as municipalities pay interest to investors. So all three (I, II, III) earn interest.

Answer:

d. I, II, and III