Question 1
The difference between the BTRORs of fully-taxable and tax-favored investments is called
◦ an explicit tax.
◦ an implicit tax.
◦ an effective tax.
◦ a marginal tax.
Question 2
Which of the following concerning implicit taxes and clienteles is
not true?
◦ Market forces drive down the BTROR of tax-favored assets.
◦ The reduced return of tax-favored assets is an implicit tax.
◦ Investors whose tax rate exceeds that of the marginal investor can reap some benefit through the clientele effect.
◦ Marginal investors will always benefit from the implicit tax on tax-favored investments.