Types of Bonds

In general, there are three main types of bonds:

Municipal bonds
These bonds are issued by state and local governments or their agencies to pay for public improvements or reducing debt. They are typically exempt from federal, and frequently state taxes if you reside in the same state as the municipal bond issued.
Corporate bonds
These bonds are issued by corporations that want to raise money for their business ventures, the interest earned from corporate bonds is taxable and may entail greater risk, so they tend to pay higher rates than government or municipal bonds.
Government bonds
Government bonds are those issued by the federal government or one of its agencies.

AARP Financial Inc. does not provide tax advice. Please consult a tax advisor for information pertaining to your particular situation.

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