If a bond has a favorable tax treatment,its required interest rate (all else equal)
A) will be higher.
B) will not be affected.
C) will be lower.
D) all of the above could happen.

Question

Quizplus · Accepted Answer

When a bond has a favorable tax treatment, it becomes more attractive to investors. As a result, demand for the bond increases, which drives down the required interest rate. Therefore, the required interest rate will be lower.

If a Bond Has a Favorable Tax Treatment,its Required Interest