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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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