Unclear Answer and Bad Explanation

[abusyhippie]

Of the 4 choices listed below, I was torn between “preferred stock” and “AA corporate bond”

I got the choice wrong and expected to see an explanation for why, but instead it says “Investment grade corporate bonds and preferred stock … are most suitable for this objective”.

If that’s the case then why are both of those choices, and why is one correct while one is incorrect? This seems arbitrary at the very least, and if not arbitrary the explanation should explain why…

[brandonrith]

Hi @abusyhippie - General obligation bonds are municipal bonds. As the explanation details, municipal bonds have low coupons because of their tax benefits, so they would not provide moderate income. I assume that’s confusion? If your choice was a corporate bond, it could certainly be argued as a correct answer.