If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Name: If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.
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If the tax rate fell, holding municipal bonds, which often offer tax-free interest, would be less attractive compared to taxable alternatives. Therefore, to attract investors, the interest rates on municipal bonds would likely need to increase, not fall.

If the Tax Rate Fell, Holding Municipal Bonds Would Be