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Give answer of Q26 in 10 mins i will give you thumb up The Treasury Department and a city government want to borrow $10,000,000 to
Give answer of Q26 in 10 mins i will give you thumb up
The Treasury Department and a city government want to borrow $10,000,000 to finance a project by selling a one-year discount bond. The interest rate on the one-year Treasury discount bond is 8 percent. The average income tax rate is 25 percent. Due to arbitrage, if you buy the Treasury bond, your after-tax rate of return will be X percent while if you buy the municipal bond, it will be Y percent. What are the values of X and Y ? a. X=8 percent &Y=6 percent b. X=8 percent &Y=4.5 percent c. X=6 percent &Y=4.5 percent d. X=6 percent &Y=6 percent e. None of the aboveStep by Step Solution
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