Suppose the City of Des Moines Has a High Credit

question 15

Multiple Choice

Suppose the city of Des Moines has a high credit rating,and so when Des Moines borrows funds by selling bonds,

• A)the city's high credit rating and the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply.
• B)the city's high credit rating and the tax status of municipal bonds both contribute to a higher interest rate than would otherwise apply.
• C)the city's high credit rating contributes to a lower interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply.
• D)the city's high credit rating contributes to a higher interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a lower interest rate than would otherwise apply.

Recognize the tax implications of investing in mutual funds, including the taxation of income dividends and capital gain distributions.

Comprehend the method and options for purchasing, withdrawing, and reinvesting in mutual funds.

Understand the importance of a mutual fund's prospectus and what information it contains.

Grasp the concept of fund management, including fees, professional management, and investment strategies.

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Definitions:

Assets

Resources owned or controlled by a business that are expected to produce economic benefits.

Liabilities

Financial obligations or debts owed by a company to external parties or individuals, expected to be settled through the outflow of resources.

Materiality

An accounting principle that means the significance of financial information to decision makers, considering its size or its nature.

Relevance

The importance of financial information in making economic decisions, ensuring that the data presented affects the users' understanding and actions.