What type of bond must an investor consider that matures in 2030 with a 5.5% interest?

In this scenario, the correct answer pertains to a municipal bond. Municipal bonds are debt securities issued by states, municipalities, or counties to finance public projects such as schools, highways, and infrastructure. They often come with tax advantages, meaning the interest earned is typically exempt from federal income tax and sometimes state and local taxes, making them attractive to investors, especially those in higher tax brackets.

Considering the maturity in 2030 and the 5.5% interest, it implies a fixed-income investment that can appeal to investors seeking long-term stability with potentially tax-exempt earnings. This is often a fundamental characteristic of municipal bonds, making them distinct and favorable compared to other types of bonds like corporate bonds or convertible bonds, which have different functions and tax implications.

Corporate bonds, for example, are issued by companies and are generally subject to federal taxes, while convertible bonds allow the bondholder to convert the bond into a specified number of shares of the issuing company, adding a layer of potential stock market benefit. Taxable bonds would also fall under the corporate bond structure but are distinguished by their interest being subject to full taxation.

In summary, the characteristics specific to municipal bonds regarding tax benefits and public project financing align well with the details provided in the