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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
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.
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