Martin Is Trying to Decide Which One of the Following

question 128

Multiple Choice

Martin is trying to decide which one of the following bonds he should purchase.All the bonds have the same maturity date and all have approximately the same level of risk.The general level of interest rates is declining.Martin is in the 33 percent federal income tax bracket and the 6 percent state income tax bracket.The municipal bonds are from his home state. Which bond should Martin purchase if he wishes to hold it for the long term?

• A)bond A because it has the highest yield and is unlikely to be called when rates are declining
• B)bond B because it has the highest after tax yield and is unlikely to be called when rates are declining
• C)bond C because bond D is likely to be called
• D)bond D because it has the highest after tax yield and is unlikely to be called when rates are declining

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Definitions:

Entrepreneur

An individual who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

Entrepreneurs

Individuals who create, launch, and manage new businesses, often taking on considerable risk in the expectation of profit.

Bankruptcy

A legal process involving a person or business that is unable to repay outstanding debts, resulting in the distribution of assets to creditors.

Equity Financing

Exchanging ownership shares for outside investment monies.