Question

What affect would reducing ncome tax rates have on the interest rates of unkelbords? A Interest rates would fail because the reduction in income tax rates would make the tax exempt privilege for municipal bonds loss valuable and reduce the demand for municipal bonds. O B. Interest rates would rise because the reduction in income tax rates would make the tax exempt privige formunicipal bondsfoss valuable and reduce the demand for municipal bonds OC Interest rates would rise because Treasury securities are now les valuable and more people will want to hold municipal bonde OD. Interest rates would fall because Treasury secures we now les valuable and more people will want to hold municipal bords Would interest rates of Treasury securities be affected by the tax rato change SA Yes, because the reduction in the tax-exempt prelepe in municipal bonds would raise the relative value of Treasury securities, making my securities more desirable OB No, there would be no impact on the market for Treasury securities OC. Yes, because the increase in interest rates would increase the desire to hold more murio bonds and Treasury secure OD Yes, because municipal bonds are less risky a Treasury demand for Treasures will de

Answer 1

Answer:-

1. Correct Option is Option B.

Explanation: Given that the municipal bonds appreciate income tax exclusion, a reduction in income tax rates won't directly affect their interest rates. Anyway since part of the fascination of putting resources into municipal bonds is because of the reality the in post tax terms their yeild is very alluring being tax excluded and if the income tax rates are diminished, it will make other contending items appear to be somewhat better consequently it will affect the demand for the municipal bonds likewise which could bring about a peripheral uptick in their security yeilds.

2. Correct Option is Option B.

Explanation: With reduction in taxes the tax benefits of municipal bonds are done engaging the financial specialist. In any case, with the fall in the interest rate cash supply in the market is expanded on account of which demand for treasury securities additionally expanded prompting change to its greatest advantage rate.