The ________ the ratio of municipal bond yields to corporate bond yields the _________ the cutoff tax bracket where more individuals will prefer to hold municipal debt.

Question

Quizplus · Accepted Answer

When the ratio of municipal bond yields to corporate bond yields is higher, it means that municipal bonds offer a better return relative to corporate bonds. This can make municipal bonds more attractive to investors, especially those in higher tax brackets who can benefit from the tax-exempt status of municipal bonds. Therefore, as the ratio increases, the cutoff tax bracket where more individuals will prefer to hold municipal debt is likely to decrease, making choice A the correct answer.

The ________ the Ratio of Municipal Bond Yields to Corporate