Preetham is considering an investment that has a stated nominal return of 12%. There is a 1% probability of default, however, in which case Preetham would lose all his investment. The
Inflation rate is expected to be 4%, and Preetham's marginal tax rate is 25%. What is his real,
After-tax, post-default expected rate of return?

Question

Quizplus · Accepted Answer

The Answer of Preetham is considering an investment that has a stated nominal return of 12%. There is a 1% probability of default, however, in which case Preetham would lose all his investment. The
Inflation rate is expected to be 4%, and Preetham's marginal tax rate is 25%. What is his real,
After-tax, post-default expected rate of return?

Preetham Is Considering an Investment That Has a Stated Nominal