Which of the following statements are true?
A) Because coupon payments on municipal bonds are exempt from federal income tax, the expected after-tax return on them will be higher for individuals in higher income tax brackets.
B) An increase in tax rates will increase the demand for municipal bonds, lowering their interest rates.
C) Interest rates on municipal bonds will be lower than on comparable bonds without the tax exemption.
D) All of the above are true statements.
E) Only A and B are true statements.

Question

Quizplus · Accepted Answer

All the statements are true. A) Municipal bonds are attractive to individuals in higher tax brackets due to their tax-exempt status, increasing their after-tax return. B) Higher tax rates make tax-exempt municipal bonds more attractive, increasing demand and potentially lowering their interest rates. C) The tax exemption on municipal bonds typically results in lower interest rates compared to taxable bonds, as investors are willing to accept a lower rate due to the tax benefits.

Which of the Following Statements Are True