A municipal bond has long been a valued financial instrument for individuals seeking relief from high taxes. However, as the study suggests, the right to tax-advantaged muni bonds comes with a steep premium. There is a premium above what would be reasonably expected for the right not to pay certain taxes. Moreover, the premium was even higher for residents of particular states. So, the prudent municipal bond investor must assess the credit, liquidity, and treasury breakeven and evaluate the premium their client may pay depending on their state's tax policy.

So, how in a perfect world would muni bonds pay interest? Explain the correlation between the greater premium and high tax states. Will you invest in Muni bonds based on the new findings? Please discuss.

Answer rating: 100% (QA)

In a perfect world municipal bonds would pay interest that reflects the creditworthiness of the issuer the prevailing interest rates in the market and ... View the full answer