Which of the Following Is True Concerning Interest Rates on Bonds

question 13

Multiple Choice

Which of the following is true concerning interest rates on bonds?

• A)The tax treatment of interest earned on municipals bonds makes the interest rate on them higher than otherwise.High default risk makes the interest rate on a bond higher than otherwise.
• B)The tax treatment of interest earned on municipals bonds makes the interest rate on them higher than otherwise.High default risk makes the interest rate on a bond lower than otherwise.
• C)The tax treatment of interest earned on municipals bonds makes the interest rate on them lower than otherwise.High default risk makes the interest rate on a bond higher than otherwise.
• D)The tax treatment of interest earned on municipals bonds makes the interest rate on them lower than otherwise.High default risk makes the interest rate on a bond lower than otherwise.

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Definitions:

Rent Seeking

Spending money in socially unproductive efforts to acquire, maintain, or exercise monopoly.

Monopoly

A market structure characterized by a single seller dominating the entire market, often leading to higher prices due to lack of competition.

Demand Curve

The demand curve is a graph showing the relationship between the price of a good and the amount that consumers are willing and able to purchase at various prices.

Consumer Surplus

The gap between what consumers are ready and can afford to pay for a product or service, versus what they actually spend.