If the nominal interest rate is 5%, the tax rate is 25%, and the expected inflation rate is 3%, what is the real after-tax return?
A)-0.75%
B)0.75%
C)1.5%
D)6.75%

Question

Quizplus · Accepted Answer

The real after-tax return can be calculated using the formula: [(1 + nominal interest rate) * (1 - tax rate) - 1] - inflation rate. Plugging in the given values: [(1 + 0.05) * (1 - 0.25) - 1] - 0.03 = 0.75%.

If the Nominal Interest Rate Is 5%, the Tax Rate