This is for Accounting. For this Question, Please answer part a), part b) & part c). Please answer all parts in the comment section. When answering. Please put Part A). (insert answer).... Part B) (insert answer) and so on. Thanks!

Question 1 15 Points 1. Municipal bonds have default risk and have tax-exempt status in comparison to treasury bonds. Describe the following: (diagrams not needed) a. The effect on bonds prices and interest rates on treasury bonds and municipal bonds if treasury bonds also have tax-exempt status. (6 marks) b. The effect on the risk-premium of municipal bonds if the Federal Government guarantees today, that it will pay creditors, should municipal government default on their payments. Do you think it will make sense for municipal bonds to be exempt from income taxes? (6 marks) c. If expectation of future short-term interest rates suddenly fell, what would happen to the slope of the yield curve? (diagrams not needed) (3 marks) Question 1 is compulsory Question 1 15 Points 1. Municipal bonds have default risk and have tax-exempt status in comparison to treasury bonds. Describe the following: (diagrams not needed) a. The effect on bonds prices and interest rates on treasury bonds and municipal bonds if treasury bonds also have tax-exempt status. (6 marks) b. The effect on the risk-premium of municipal bonds if the Federal Government guarantees today, that it will pay creditors, should municipal government default on their payments. Do you think it will make sense for municipal bonds to be exempt from income taxes? (6 marks) c. If expectation of future short-term interest rates suddenly fell, what would happen to the slope of the yield curve? (diagrams not needed) (3 marks) Question 1 is compulsory