You Are Considering the Purchase of One of Two Different

question 54

Multiple Choice

You are considering the purchase of one of two different bonds,a muni,which currently yields 6%,and a corporate,which currently yields 10%.If you are trying to maximize your return and you are in a 38% tax bracket,which of the following is true?

• A)The muni bond has a better yield for you.
• B)The corporate bond has a better yield for you.
• C)The bonds have identical yields for you.
• D)There is not enough information to determine which is a better yield for you.

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Definitions:

Uncovered Interest Parity

A financial theory that suggests interest rate differentials between two countries will be equal to the expected change in exchange rates between their currencies.

Exchange Rate

The value of one currency for the purpose of conversion to another, which fluctuates based on market conditions and impacts international trade and investments.

British Pounds

The official currency of the United Kingdom, also known as GBP (Great Britain Pound).

Swiss Francs

The official currency of Switzerland and Liechtenstein, known for its strength and stability as a global finance indicator.