How do I know which type of bond is most appropriate for an investor? ...

Most Bonds are designed to provide investors with regular interest payments and are most suitable for investors who have an income investment objective. Matching the particular type of bond to the investor’s profile is the key to answering the questions correctly. In the question there will be keys that help you identify which bond is the most appropriate and therefore correct choice. Key factors include such things as are they looking for maximum income or safety of principal. If they are seeking maximum income corporate bonds are going to be the best choice. Investors who are seeking safety of principal should be placed in the highest rated bond choice in the question. Treasury securities are often the correct choice here. Keep in that shorter term investments carry less interest rate risk. For the most risk adverse investors a money market fund may be the correct choice. There is no market risk and the money market fund will provide some level of income. Treasury bills are not the correct choice for investors seeing income. Remember that Treasury bills are issued at a discount and mature at the par value. Municipal bonds are best for investors who have an income objective but who do not want to incur additional tax obligations. Investors in higher tax brackets benefit the most from investments in municipal bonds. Investors who are in lower tax brackets will be better off investing in corporate bonds of equal quality.