A municipal discount bond is promising to pay $2,150 next year. It is selling for $2,000 today. A treasury bond also promises to pay $2,150 next year. If the average income tax rate faced by bond market investors in 25 percent, due to arbitrage, the interest rate on the Treasury bond will be X percent and its price will equal Y dollars, where:

a. X = 12 percent & Y = $2,000

b. X = 10 percent & Y = $2,000

c. X = 10 percent & Y = $2,200

d. X = 12 percent & Y = $2,200