Which of the Following Is False

Multiple Choice

Which of the following is false?

A) The buying and selling by investors results in the yield on municipals being approximately equal to the yield on similarly rated taxable securities, such as corporate bonds, minus the portion of the yield that is taxed away.
B) Taxpayers, depending on their individual incomes, are in different marginal tax brackets, some high and some low, and there is an average marginal tax rate somewhere between the high and the low marginal tax brackets.
C) The interest rate on municipal securities will gravitate to the rate that makes the "average" taxpayer (in the average marginal tax bracket) indifferent between municipals and similarly rated corporate securities.
D) Banks and rich individuals are attracted to municipals because they are subject to a tax rate equal to the average marginal rate.