A treasury manager is examining two possible investment alternatives for the firms excess cash holdings....
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Accounting
A treasury manager is examining two possible investment alternatives for the firms excess cash holdings. Investment A is a taxable money market security with a yield of 3.2%. Investment B is a muni with a yield of 2.5%. The firm's marginal tax rate is 35%. **Please use formula TEY=Tax-Exempt Yield/(1-investors marginal tax rate)**
| a. With these base assumptions, which security should the treasury manager choose? |
| b. At what marginal tax rate would the treasury manager be indifferent between the securities? |
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