We investigated the polarization-mode dispersion (PMD) tolerance for 40Gb/s non-return to zero (NRZ), duobinary NRZ, return to zero (RZ), carrier-suppressed RZ (CS-RZ), and duobinary-carriersuppressed RZ (DCS-RZ) modulation formats with a forward error correction (FEC) coding. The power penalty has been calculated as a measure of the system performance due to PMD. After comparison of the PMD tolerance of various modulation formats, our results suggest that RZ signals have the best tolerance against the effect of first-order PMD only. The duobinary NRZ modulation format is most resilient to PMD when both first-and second-order PMD are considered. However, the duobinary NRZ modulation format is the most sensitive to the incident angle of the input signal to a fiber axis in the presence of first-and second-order PMD, leading to incident angledependent power penalty. The coding gain by FEC can cope with the power penalties induced by first-and second-order PMD up to a DGD value of 16ps.