Question

In: Finance

9. Answer the following questions for #9 with 50 - 100 words. What is the key...

9. Answer the following questions for #9 with 50 - 100 words.

What is the key tax characteristic for investors associated with state and local (municipal) securities?

How would you define efficient security markets?

Solutions

Expert Solution

the key tax charecteristics of investors associated with state or local securities is that they are tax exempt that is the interest that is paid on such bond is not subject to local income taxes or state income taxes.

due to the tax free nature of such bonds, the yields offered on such bonds is lower in compariosn to the risk free treasury bond issued by the government.

efficient markets are markets where all the available information is available to all the people at the same time, and the prices respond to theses information instantly. the stock markets are perfect information of efficient markets. under the ideal conditions , the iformation is free and is available to everyone at the same time and on the basis of that, the investors can make rational decisions.

this theroy claims that no one can beat the market on the basis of fundamental analysis or technical analysis or any investments based on speculations will not yield any gains.


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