Multiple Choice
If their only concern were the cost of issuing municipal debt, how would you expect the mayors of most U.S. cities to respond to a revenue-neutral change in the federal income tax that sharply lowered the top marginal tax rate?
A) Favorably, since this will significantly increase the demand for municipal bonds.
B) Unfavorably, the demand for municipal bonds will fall and their yields will increase.
C) Favorably, the price of municipal bonds should increase and their yields fall.
D) No reaction, this should have no impact on municipal bonds at all.
Correct Answer:
Verified
Correct Answer:
Verified
Q113: Briefly describe the two different types of
Q114: What is the effective after-tax yield to
Q115: The expectations hypothesis assumes each of the
Q116: If a bond's rating improves it should
Q117: Bonds issued by the U.S. Treasury are
Q119: A flight to quality should result in
Q120: Why do yield curves usually slope upward?
Q121: An inverted yield curve is a valuable
Q122: The reason for the increase in inflation
Q123: We would expect the relationship between the