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Question
Discuss why a municipality would want to issue a taxable municipal bond, thereby paying a higher yield than if it issued a tax-exempt municipal bond.Answer
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When a trader positions the capital of the investment banking firm to take advantage of a specific anticipated movement of prices or a spread between two prices, this strategy is referred to as:a. Riskless arbitrage.b. Risk arbitrage.c. Speculation.d. Hedging.e. None of the above.
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In a firm commitment underwriting arrangement, the risk that the investment banking firm accepts is:a. That it sells the securities to investors at a lower price.b. That the price it pays to purchase the securities from the issuer will be less than the price it receives when it reoffers the securities to the public.c. That it does not buy the entire issue from the issuer.d. That it does not realize the gross spread.e. None of the above.