Sally Is Choosing Between Two Bonds Both of Which Mature

question 24

Multiple Choice

Sally is choosing between two bonds both of which mature in 15 years and have the same level of risk. Bond A is a municipal bond that yields 5.25%. Bond B is a corporate bond that yields 7.75%. If Sally is in the 30% tax bracket, which bond should she select and why?

• A) Sally should select Bond A because its interest income is not taxable.
• B) Sally should select Bond B is better because it has lower risk.
• C) Sally should select Bond A because its taxable equivalent yield is greater than the yield of Bond B.
• D) Sally should select Bond B because the taxable equivalent yield of Bond A is less than the yield of Bond B.

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Definitions:

Deviant Methods

Behaviors or actions that fall outside the normative standards or expectations of a society or community.

Criminogenic

Pertaining to or likely to cause criminal behavior.

Conflict Theorists

Sociologists who focus on social, political, or material inequalities of a social group, analyzing the social and political power dynamics that give rise to conflict and change.

Deviance

Behaviors or actions that violate societal norms or expectations, often eliciting negative societal responses.