Income Beginner: Taxes in Bond Investing

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1.
Assume that you are in the 12 percent federal tax bracket and you pay a 6 percent state tax. What will be your taxable equivalent yield on a municipal bond earning 7 percent?
Choose wisely. There is only one correct answer.
8.46 percent.
2.
If you earn interest on an inflation-adjusted bond, _______.
Choose wisely. There is only one correct answer.
The income is taxed as ordinary income by the IRS. If you earn interest on an inflation-adjusted bond, the income is taxed as ordinary income by the IRS.
3.
Of the following tax brackets, which one will leave you with the highest yield on a municipal bond compared to a taxable bond?
Choose wisely. There is only one correct answer.
35 percent. The higher the tax bracket, the more you earn when the bond is compared to a taxable bond.
4.
If you know your tax bracket, you already know the taxable equivalent yield on your municipal bond.
Choose wisely. There is only one correct answer.
False. You will need to know the yield on the municipal bond in question.
5.
To qualify for the tax exclusion offered through the Education Bond Program, you must ______.
Choose wisely. There is only one correct answer.
Be at least 24 years old at the time you purchase your bond. To qualify for this program, an adult age 24 or older must buy the bonds.
6.
The amount of one's original issue discount interest can be found on Form 1099-OID.
Choose wisely. There is only one correct answer.
True. Form 1099-OID exists just for this purpose.