Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?
A) Inflation is 3 percent; the tax rate is 20 percent.
B) Inflation is 2 percent; the tax rate is 40 percent.
C) Inflation is 1 percent; the tax rate is 60 percent.
D) The after-tax real interest rate is the same for all of the above.
Correct Answer:
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