Suppose That Your Marginal Federal Income Tax Rate Is 30%,the

question 57

Multiple Choice

Suppose that your marginal federal income tax rate is 30%,the sum of your marginal state and local tax rates is 5%,and the yield on thirty-year U.S.Treasury bonds is 10%.You would be indifferent between buying a thirty-year Treasury bond and buying a thirty-year municipal bond issued within your state (ignoring differences in liquidity,risk,and costs of information) if the municipal bond has a yield of

• A) 6.5%.
• B) 7.0%.
• C) 9.5%.
• D) 10.0%.

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Definitions:

Consumer Goods

Products bought by the final consumer for personal use.

Law of Increasing Opportunity Costs

An economic principle that states as production of a good or service increases, the opportunity cost of producing another unit also increases.

Particular Good

A specific item or product that satisfies consumers' needs or wants, distinguishable from general categories or types of goods.

Market Price

The current price at which an asset or service can be bought or sold in a market.