Suppose a Foreign Investor Who Holds Tax-Exempt Eurobonds Paying 9

Multiple Choice

Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 28% withholding tax on interest paid to foreigners.If 9% after-tax is the investor's required return,what before-tax rate would the domestic bond need to pay to provide the required after-tax return?

A) 9.11%
B) 10.13%
C) 11.25%
D) 12.50%
E) 13.75%