SIE Exam Question 182: Answer and Explanation

Question: 182

Which of the following investments would not be a suitable recommendation for an IRA?

• A. Common stock
• B. Corporate bond
• C. Municipal bond
• D. Mutual fund

Correct Answer: C

Explanation:

A municipal bond is not a suitable investment in an IRA. Since the account is tax deferred, there is no advantage to owning an investment that is tax free. Investors are required to pay taxes on earnings from common stock, corporate bonds, and mutual fund shares, so it would be worthwhile to purchase these through a tax-advantaged account such as an IRA.