A government may have arbitrage when:

Select one:

a$.$ It pays a higher rate on its tax$-$exempt debt than the rate that it receives from its investmer

b$.$ Its debt pays a lower rate of interest than federally issued debt of the same credit quality.

c$.$ It finances capital projects through federal grants.

d$.$ It borrows money at a lower tax$-$exempt rate but invests it at a higher rate.