You put money into an account and earn a real interest rate of 6 percent.Inflation is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?
A)4.8 percent
B)5.4 percent
C)7.2 percent
D)4.2 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is 9% (6% real interest rate + 3% inflation). After tax, the nominal rate is 7.2% (9% * (1 - 0.20)). The after-tax real rate is 4.2% (7.2% - 3% inflation).

You Put Money into an Account and Earn a Real