If the nominal return is constant,the after-tax real rate of return
A)declines as the inflation rate increases.
B)increases as the inflation rate increases.
C)declines as the inflation rate declines.
D)increases as the inflation rate decreases.
E)A and D.

Question

If the nominal return is constant,the after-tax real rate of return 
A)declines as the inflation rate increases.
B)increases as the inflation rate increases.
C)declines as the inflation rate declines.
D)increases as the inflation rate decreases.
E)A and D.

Quizplus · Accepted Answer

The after-tax real rate of return is affected by inflation. If the nominal return is constant, higher inflation reduces the real return, and lower inflation increases it.

If the Nominal Return Is Constant,the After-Tax Real Rate of Return