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- Bond A is a municipal bond and Bond B is a corporate bond. If you pay a very high tax rate, which bond do you prefer? Select one: a. B b. A c. A=BIdentify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. Interest on bonds is tax deductible.Zero coupon bonds: O a. create annual taxable income to individual bondholders. O b. create a tax deduction for the issuer only at maturity. O care issued only by the U.S. Treasury. O d. are issued at a premium. O e. are valued using simple interest.
- What are municipal bonds? What characteristics makes them especially attractive to high-income investors?A bond tends to pay a high interest rate if it isa. a short-term bond rather than a long-term bond.b. a municipal bond exempt from federal taxation.c. issued by the federal government rather than acorporation.d. issued by a corporation of dubious credit quality7. Zero-coupon bonds are the best way for high-income taxpayers to extract maximum value from tax-exempt state and local government bonds because: a.Zero-coupon bonds are sold for nearly their full face value and provide most of their income in the form of interest. b.Zero-coupon bonds allow the investor to make additional tax-exempt investments. c.The interest earned on the accumulated principal and interest is not tax-exempt. d.The investments pay interest continually. e.Zero-coupon bonds include more transaction fees.
- 2. Which statement is not correct? a) Municipal bonds tend to have a lower yield than Treasuries b) Municipal bonds tend to have a lower rating than Treasuries c) Municipal bonds are "risk free" securities d) Municipal bonds are an interesting investment from a tax perspective2. Which of the following is a reason why zero-coupon bonds are the best way for high-income taxpayers to extract maximum value from tax-exempt state and local government bonds? a.The investments pay interest continually. b.The interest earned on the accumulated principal and interest is not tax-exempt. c.Zero-coupon bonds are high-risk, high-reward bonds. d.Zero-coupon bonds include more transaction fees. e.Zero-coupon bonds allow the investor to make additional tax-exempt investments.Series EE bonds are: Question 5 options: corporate bonds that produce income that is taxed the same as other investment income. corporate bonds that produce income that may be exempt from some taxes. U.S. savings bonds that produce income that is taxed the same as other investment income. U.S. savings bonds that produce income that may be exempt from some taxes.
- The cash interest payment a corporation makes to its bondholders is based on ________.A. the market rate times the carrying valueB. the stated rate times the principalC. the stated rate times the carrying valueD. the market rate times the principaAn investor seeking relatively low default risk investments combined with some type of favorable tax treatment and inflation protection should consider which of the following?(1) Insured municipal bonds. (2) TIPS. (3) Zero coupon Treasury bonds. (4) Series I savings bonds. (5) Series HH savings bonds. a. 1, 2 and 3. b. 1, 2 and 4. c. 2 and 4. d. 2, 4 and 5.Investors with high tax rates tend to prefer municipal bonds. Select one: True False