The nominal interest rate is 10%,the expected inflation rate is 5%,and the combined state-federal tax is 35%.The expected real after-tax rate of return is
A)1.50%.
B)3.25%.
C)5.00%.
D)6.50%.

Question

Quizplus · Accepted Answer

The expected real after-tax rate of return is the nominal interest rate minus the expected inflation rate and the combined state-federal tax rate. In this case, the expected real after-tax rate of return is 10% - 5% - 35% = 1.50%.

The Nominal Interest Rate Is 10%,the Expected Inflation Rate Is