1. An investor who resides in the state of Massachusetts purchases a municipal bond that is issued by a Massachusetts municipality. Which of the following is true with respect to the taxability of this bond to the investor?
Tax exempt at the federal level but not at the state level
Tax exempt at the state level but not at the federal level
Taxable at both the state and the federal level
Tax exempt at both the state and the federal level
2. A firm has purchased raw materials on credit, and has been given the payment terms as 3/10; net 40. The firm has calculated the interest rate of waiting until 40 days to pay the credit to be 44.86%. How should the firm view this interest rate?
The average interest rate on their portfolio of marketable securities
The effective borrowing rate should they decide to take the discount
The effective borrowing rate should they decide not to take the discount
The amount of the discount, that is - a discount of $55.14 for each $100 of credit
The amount of the discount - that is - a discount of $44.86 for each $100 of credit