Suppose the city of Des Moines has a high credit rating,and so when Des Moines borrows funds by selling bonds,
A)the city's high credit rating and the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply.
B)the city's high credit rating and the tax status of municipal bonds both contribute to a higher interest rate than would otherwise apply.
C)the city's high credit rating contributes to a lower interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply.
D)the city's high credit rating contributes to a higher interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a lower interest rate than would otherwise apply.

Question

Quizplus · Accepted Answer

A high credit rating indicates that the city is a low-risk borrower and therefore can borrow funds at a lower interest rate. Additionally, municipal bonds are exempt from federal income taxes, which makes them more attractive to investors and thus helps lower the interest rate. Therefore, both the credit rating and tax status of municipal bonds contribute to a lower interest rate than would otherwise apply.

Suppose the City of Des Moines Has a High Credit