Final answer:
Mutual funds composed of municipal bonds with high credit ratings allow investors in high tax brackets to avoid taxes while maintaining a low degree of credit risk. The correct option is a. municipal; credit risk.
Step-by-step explanation:
Mutual funds composed of municipal bonds with high credit ratings allow investors in high tax brackets to avoid taxes while maintaining a low degree of credit risk.
Municipal bonds are bonds issued by cities that wish to borrow money. They are typically exempt from federal taxes and sometimes state taxes, making them attractive for investors in high tax brackets.
By investing in municipal bond mutual funds, investors can benefit from the tax advantages while still maintaining a low level of credit risk because the bonds have high credit ratings.
Therefore, the correct option is a. municipal; credit risk.