Which of the following statements are true?
A) An increase in tax rates will increase the demand for Treasury bonds, lowering their interest rates.
B) Because the tax-exempt status of municipal bonds was of little benefit to bond holders when tax rates were low, they had higher interest rates than U.S. government bonds before World War II.
C) Interest rates on municipal bonds will be higher than comparable bonds without the tax exemption.
D) 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 lower income tax brackets.

Question

Quizplus · Accepted Answer

Before World War II, the tax-exempt status of municipal bonds was less beneficial when tax rates were low, leading to higher interest rates compared to U.S. government bonds.

Which of the Following Statements Are True