Suppose a Bank Has Found Bank-Qualified Municipal Bonds Which Have

Suppose a bank has found bank-qualified municipal bonds which have a nominal gross rate of return of 8 percent and that it can borrow funds needed for this purchase at a rate of 6.25 percent.The bank is in the 35 percent tax bracket.What is the net after-tax return on this bond?

A) 5.20 percent
B) 3.5 percent
C) 1.75 percent
D) 0 percent
E) None of the options is correct