When a Municipal Bond Is Given Tax-Free Status,the Demand for Municipal

question 16

Multiple Choice

When a municipal bond is given tax-free status,the demand for municipal bonds shifts ________,causing the interest rate on the bond to ________.

• A) leftward; rise
• B) leftward; fall
• C) rightward; rise
• D) rightward; fall

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Definitions:

Residual Value

The estimated value of an asset at the end of its useful life, reflecting what it could be sold for or its salvage value.

Lessor

An entity or individual that leases or rents property or assets to a lessee.

Lessee

The entity that obtains the right to use an asset under a lease agreement from the lessor.

Uses the Asset

Refers to how an asset is employed within a business or investment strategy to generate returns or benefits.