Question: ECB borrows $2 billion dollars by issuing 10 year bonds. ECB cost of debt is 6% so it will need to pay $120M in interest

ECB borrows $2 billion dollars by issuing 10 year bonds. ECB cost of debt is 6% so it will need to pay $120M in interest each year for 10 years, and the, and repay the principal $2B in year 10. ECB's marginal tax rate will remain 35% throughout this period.

A) By how much does the interest tax shield increase the value of ECB.

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