Given a nominal interest rate of 7 percent,in which of the following cases would you earn the lowest after-tax real interest rate?
A) Inflation is 1 percent,and the tax rate is 10 percent.
B) Inflation is 2 percent,and the tax rate is 15 percent.
C) Inflation is 3 percent,and the tax rate is 20 percent.
D) Inflation is 4 percent,and the tax rate is 25 percent.

Question

Quizplus · Accepted Answer

The after-tax real interest rate is the nominal interest rate minus the inflation rate times (1 - tax rate). In this case, the after-tax real interest rate is 7% - 1% x (1 - 10%) = 6.3%.

Given a Nominal Interest Rate of 7 Percent,in Which of the Following