Given a nominal interest rate of 12 percent, when would you earn the highest after-tax real interest rate?
A) Inflation is 2 percent, and the tax rate is 50 percent.
B) Inflation is 3 percent, and the tax rate is 30 percent.
C) Inflation is 4 percent, and the tax rate is 20 percent.
D) Inflation is 5 percent, and the tax rate is 40 percent.

Question

Quizplus · Accepted Answer

The after-tax nominal rate is highest in option C, and with lower inflation, the real rate is maximized.

Given a Nominal Interest Rate of 12 Percent, When Would