Treasury bonds are exempt from income tax

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Reference no: EM131896484

1. If Congress passes a law such that long term Treasury bonds are exempt from income tax (that is, they are not taxed) then, all else equal, one would expect

Interest rates at every maturity to rise

Interest rates at every maturity to fall

The term structure to become steeper (greater slope)

The term structure to become flatter (less slope)

2. Assume investors require a 5 percent annualized return on a 6 month T-Bill with par value of $10,000. The price invetsors would be willing to pay is ?

A) 10,000

B) 9,524

C) 9756

D) none of the above

Reference no: EM131896484

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