The Interest Rate on Tax-Exempt Bonds Falls Relative to the Interest

question 25

Multiple Choice

The interest rate on tax-exempt bonds falls relative to the interest rate on U.S. Treasury securities when ________.

• A) there is a major default in the tax-exempt bond market
• B) income tax rates are raised
• C) tax-exempt bonds become less widely traded
• D) corporate bonds become riskier

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Definitions:

Receivables Growth

An increase in the amount of money owed to a company by its customers for goods or services delivered on credit.

Aggressive Revenue

Recognition of revenue in a way that may artificially inflate sales figures, often bending the rules of standard accounting practices.

Fair Value Option

The choice given to entities to report certain financial assets and liabilities at their fair value to measure change in their value.

Financial Instrument

An agreement resulting in a financial asset for one party and a financial obligation or equity security for another.