A Tax Free Municipal Bond Pays an Effective Annual Rate

question 21

Multiple Choice

A tax free municipal bond pays an effective annual rate of 7.2%.If your tax rate is 30%,then the effective annual rate that a comparable corporate bond would have to offer you an equivalent after tax return would be closest to:

• A) 5.0%
• B) 7.2%
• C) 9.4%
• D) 10.3%

---

Definitions:

Economic Growth

The increase in the production of goods and services in an economy over time, usually measured by the rise in Gross Domestic Product (GDP).

Dependency Theory

A theory suggesting that economic disparities between countries are the result of the exploitation of poorer countries by wealthier ones, leading to a state of dependency.

International Telecommunications

The exchange of information over significant distances through electronic means, connecting people and entities across borders.

Technological Progress

The advancement and innovation in technology that leads to new devices, methods, and capabilities, improving efficiency and quality of life.