If the nominal interest rate is 11%, the inflation rate is 4% and the tax rate is 25%, what is the real after-tax interest rate?
A)-1.25 percent
B)4.25 percent
C)5.25 percent
D)8 percent
E)10 percent

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate: 11% - 4% = 7%. The after-tax nominal interest rate is 11% * (1 - 0.25) = 8.25%. The real after-tax interest rate is 8.25% - 4% = 4.25%.

If the Nominal Interest Rate Is 11%, the Inflation Rate