What Is the Rationale for Saying That the Federal Government

question 110

Multiple Choice

What is the rationale for saying that the federal government provides a tax subsidy to corporate debtors?

• A)interest and principal payments are tax deductible.
• B)interest payments are tax deductible.
• C)principal payments are tax deductible.
• D)70 % of interest payments are tax deductible.

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Definitions:

Risk-free Rate

The estimated rate of profit for a no-risk investment, usually depicted by the earnings from government securities.

American Call

An option contract that gives the holder the right to buy a specific asset at a set price anytime before the expiration date.

Expiration Date

The predefined date after which an option or other financial contract becomes invalid and the right to exercise it ceases.