1) A company wants to compare the yield from a $200,000 state-issued bond with a tax-exempt yield of 6.5% to that of a 182-day $200,000 T-bill with an 8.51% discount rate. Assuming that the investor has a marginal tax rate of 32%, what are the bond equivalent yield (BEY) and the tax equivalent yield (TEY) for the appropriate instruments?

a. 9.56% TEY (state bond); 9.02% BEY (T-bill)

b. 9.56% TEY (state bond); 8.63% BEY (T-bill)

c. 8.32% TEY (state bond); 8.63% BEY (T-bill)

d. 8.32% TEY (state bond); 9.02% BEY (T-bill)