Suppose the yields on tax-exempt local government bonds in Problem 9 initially were below the Treasury yields

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Suppose the yields on tax-exempt local government bonds in Problem 9 initially were below the Treasury yields of the same maturity. If the tax-exempt status were then removed from the local government bonds, would you expect their yields spreads versus treasuries to narrow, to disappear, or change sign? Explain your answer.

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Related Book For  answer-question

Money Banking And Financial Markets

ISBN: 9781260226782

6th Edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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