QUESTION 53

1. Which of the following is/are not correct concerning Treasury notes and bonds? (1) Notes and bonds are taxed similarly to T-bills. (2) Original issue discount tax rules do not apply to Treasury STRIPs. (3) Interest income is exempt from state and local taxes, but capital gains are normally taxable at the state and local level. (4) Interest income and capital gains are exempt from federal taxes.

   		a. 1 and 3.
   		b. 1 and 4.
   		c. 2 and 3.
   		d. 2 and 4.