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A mutual fund sponsor has three different income funds, holding AAA rated debt securities with similar maturities. Assuming that the expense ratios for the funds are identical, which fund would have the lowest yield from investment income?

User Zjk
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Answer: C. Municipal Bond Fund

Step-by-step explanation:

Municipal Bonds would be the fund with the lowest yield from investment income. This is assuming they are all AAA rated debt securities with similar maturities. This is because Municipal bonds are tax exempt and not very risky so their yields will be quoted as less as they do not have to compensate investors on tax losses.

Corporate Bonds are the riskiest of the options given so they will have the highest yield as they have to compensate for both risk and taxes.

Government Bonds are considered very low when it comes to risk but they are taxed by the Federal Government so have higher yields to compensate for tax.

User Mike Blyth
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