Tax-Exempt Bonds

question 103

Multiple Choice

Tax-exempt bonds:

• A) generate higher returns for the bondholder when purchased through a tax-exempt retirement account.
• B) are not affected by changes in yields on taxable bonds.
• C) are most beneficial to those who pay higher income tax rates.
• D) include U.S. Treasury securities because the Internal Revenue Service does not charge income tax on interest earned from these bonds.

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Definitions:

Constraint

A condition or limitation that must be satisfied in optimization problems or in systems design.

Shadow Price

The implied worth or value of an intangible or constrained resource, used in economic or optimization models to assess opportunity costs.

Dual Value

A concept in linear programming and optimization, representing the worth of relaxing a constraint by one unit in the objective function.

Redundant Constraint

A constraint in a mathematical model that does not affect the feasible region or solution because it is already implied by other constraints.