You put money in an account and earn a real interest rate of 8 percent. Inflation is 2 percent, and your marginal tax rate is 30 percent. What is your after-tax real interest rate?

Question

Quizplus · Accepted Answer

The nominal interest rate is the real interest rate plus inflation, which is 8% + 2% = 10%. The after-tax nominal interest rate is 10% * (1 - 0.30) = 7%. The after-tax real interest rate is the after-tax nominal interest rate minus inflation, which is 7% - 2% = 5%.

You Put Money in an Account and Earn a Real