Suppose a foreign investor who holds tax-exempt Eurobonds paying 10.50% is considering investing in an equivalent-risk domestic bond in a country with a 28.00% withholding tax on interest paid to foreigners. If 10.50% 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. 15.46%
B. 16.33%
C. 16.92%
D. 12.83%
E. 14.58%
Answer: E
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