An Australian company wishes to invest AUD1 000 000 in ten-year bonds. The ten-year bond rate in Australia is 5.11% and in the U.K. is 6.00%. The AUD/GBP spot rate is 2.5372 and the estimated spot rate at maturity is 2.6000. The income tax rates for Australia and the U.K. are respectively 49% and 39%. The capital gains tax rate in Australia is 39%. Where would you invest?

A.

Invest in the U.K.

B.

Either, as there is no difference.

C.

There is insufficient information to decide.

D.

Invest in Australia.