The Sampsons- A continuing Case: Chapter 16

The Sampsons are considering investing in bonds as a way of saving for their children's college education. They learn that there are bonds with maturities between twelve and sixteen years, which is exactly when they need the funds for college expenses. Dave and Sharon notice that some highly rated municipal bonds offer a coupon rate of 2%, while some highly rated corporate bonds occur at a coupon rate of 4%. The Income on the municipal bonds would not be subject to federal income tax. Dave and Sharon are looking to you to advise on whether bonds are a sound investment.

1. If the Sampsons decide to purchase bonds, should they invest in corporate bonds or municipal bonds? FACTOR INTO YOUR ANALYSIS THE RETURN THEY WOULD RECEIVE.