You put money in an account that earns 9 percent. The inflation rate is 5 percent, and your marginal tax rate is 10 percent. What is your after-tax real rate of interest?

Question

Quizplus · Accepted Answer

To find the after-tax real rate of interest, we need to subtract the inflation rate and the taxes from the interest rate. So, the calculation would be: 
After-tax real rate of interest = (1 + 0.09)/(1 + 0.05) * (1 - 0.10) - 1 = 0.031 or 3.1%
Therefore, the best choice is B.

You Put Money in an Account That Earns 9 Percent