If a Bond Has a Favorable Tax Treatment,its Required Interest

question 50

Multiple Choice

If a bond has a favorable tax treatment,its required interest rate (all else equal)

• A) will be higher.
• B) will not be affected.
• C) will be lower.
• D) all of the above could happen.

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Definitions:

Debt Ratio

A financial metric that assesses a firm's level of indebtedness by dividing its total liabilities by its total assets.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by stockholders' equity.

Net Income

The company's net earnings following the subtraction of all costs and taxes from its income.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations using its current assets, calculated as current assets divided by current liabilities.