Question

Walter White has come to you asking about investments that will produce steady income, provide relative safety of principal, and give him a tax advantage. What will you recommend that he consider adding to his portfolio?

	a.	Municipal bonds
	b.	Zero-coupon US Treasury bonds
	c.	A corporate bond
	d.	Growth and income mutual fund

Answer 1

zero coupon bond is a bond that does not pay any kind of interest but in fact it trades at deep discount so investment into united state treasury zero coupon bond, is not advisable since he is looking for a a regular and uniform stream of income.

investment in municipal bonds will be desirable as he is looking for tax advantage so interest paid by municipal bonds are tax free. There is a high level of safety of capital also.

Growth and income mutual fund will not be desirable because it is providing no uniform stream of income and corporate bond are risky in nature not preferable.

So I would advice Walter white to add municipal bonds in his overall portfolio.

Show the correct answer would be option (a) municipal bonds.