Differences in the taxation of returns
A)only affect the yields of illiquid credit market instruments.
B)have a negligible effect on the yields of credit market instruments.
C)only affect the yields of high-information cost credit market instruments.
D)create differences in yields among credit market instruments.

Question

Quizplus · Accepted Answer

Differences in taxation of returns create differences in yields among credit market instruments. This is because investors tend to choose investments with the highest after-tax returns, and instruments with favorable tax treatment will have relatively higher yields than those that are less tax-efficient. This can create a significant difference in yields among credit market instruments.

Differences in the Taxation of Returns