What is a bond that provides federally tax-free interest income?

A bond that provides federally tax-free interest income is known as a municipal bond. Municipal bonds are issued by state and local governments to finance public projects such as schools, highways, and hospitals. One of the key incentives for investors is that the interest earned on these bonds is exempt from federal income tax, and in some cases, state and local taxes as well, making them an attractive investment for those in higher tax brackets.

In contrast, the other options do not typically offer tax-free interest. Minimum security is not a recognized type of investment product, and government bonds and treasury bills are subject to federal taxes on the interest income they generate. Thus, municipal bonds stand out as the correct answer due to their tax-exempt status, making them particularly beneficial for tax-sensitive investors seeking to maximize their after-tax returns.