You purchase a one-year security with an expected real pretax return of 5%. You forecast a 7% rate of inflation and are in the 28% tax bracket. Your after-tax nominal return would be
A) 2.6%.
B) 5.4%.
C) 4.3%.
D) 8.9%.

Question

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The Answer of You purchase a one-year security with an expected real pretax return of 5%. You forecast a 7% rate of inflation and are in the 28% tax bracket. Your after-tax nominal return would be
A) 2.6%.
B) 5.4%.
C) 4.3%.
D) 8.9%.

You Purchase a One-Year Security with an Expected Real Pretax